LABRANCHE & CO INC, S-1, 1999-06-18

LABRANCHE & CO INC
S-1, 1999-06-18

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1999

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

LABRANCHE & CO INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 6211 13-406-4735
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

ONE EXCHANGE PLAZA
NEW YORK, NEW YORK 10006-3008
(212) 425-1144

(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

GEORGE M.L. LABRANCHE, IV
LABRANCHE & CO INC.
ONE EXCHANGE PLAZA
NEW YORK, NEW YORK 10006-3008
(212) 425-1144
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------

with copies to:

<TABLE>
<S> <C>
JEFFREY M. MARKS, ESQ. ALAN L. BELLER, ESQ.
WARREN J. NIMETZ, ESQ. WILLIAM F. GORIN, ESQ.
FULBRIGHT & JAWORSKI L.L.P. CLEARY, GOTTLIEB, STEEN & HAMILTON
666 FIFTH AVENUE ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10103 NEW YORK, NEW YORK 10006
(212) 318-3000 (212) 225-2000
</TABLE>

------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ______

If this Form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO BE AGGREGATE OFFERING AMOUNT OF
REGISTERED PRICE (1)(2) REGISTRATION FEE
<S> <C> <C>
Common stock, $.01 par value per share...................................... $212,750,000 $59,145
</TABLE>

(1) Includes shares subject to over-allotment options granted to the
Underwriters.

(2) Estimated solely for purpose of calculating the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933, as amended.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED , 1999

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS

LABRANCHE & CO INC.

COMMON STOCK
------------------

We are selling shares of our common stock. The underwriters named in
this prospectus may purchase up to additional shares of common stock
from us under certain circumstances.

This is an initial public offering of common stock. We currently expect the
initial public offering price to be between $ and $ per share, and
will apply to have the common stock listed on the New York Stock Exchange under
the symbol "LAB."
------------------------

INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE .

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------- --------------
<S> <C> <C>
Public Offering Price.................................................. $ $
Underwriting Discount.................................................. $ $
Proceeds to LaBranche & Co Inc. (before expenses)...................... $ $
</TABLE>

The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about ,
1999.
------------------------

SALOMON SMITH BARNEY DONALDSON, LUFKIN & JENRETTE
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary........................................................................................ 1
Risk Factors.............................................................................................. 7
Use of Proceeds........................................................................................... 18
Dividend Policy........................................................................................... 18
Reorganization and Related Transactions................................................................... 18
Capitalization............................................................................................ 20
Selected Historical Consolidated Financial Data........................................................... 22
Management's Discussion and Analysis of
Financial Condition and Results of Operations........................................................... 24
Business.................................................................................................. 35
Management................................................................................................ 49
Employment Agreements and Noncompetition Agreements....................................................... 50
Incentive Awards to Our Employees......................................................................... 52
Principal Stockholders.................................................................................... 55
Certain Transactions...................................................................................... 56
Description of Capital Stock.............................................................................. 58
Shares Eligible for Future Sale........................................................................... 60
Underwriting.............................................................................................. 63
Legal Matters............................................................................................. 65
Experts................................................................................................... 65
Where You Can Find Additional Information................................................................. 65
Index to Financial Statements............................................................................. F-1
</TABLE>

------------------------

Until 1999, all dealers that buy, sell or trade the common
stock, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
PROSPECTUS SUMMARY

THE INFORMATION BELOW IS ONLY A SUMMARY OF MORE DETAILED INFORMATION
INCLUDED IN OTHER SECTIONS OF THIS PROSPECTUS. THE OTHER INFORMATION IS
IMPORTANT, SO PLEASE READ THIS ENTIRE PROSPECTUS CAREFULLY. UNLESS STATED
OTHERWISE, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION TO PURCHASE SHARES OF OUR COMMON STOCK
HAS NOT BEEN EXERCISED AND THAT WE HAVE COMPLETED THE REORGANIZATION OF OUR FIRM
FROM PARTNERSHIP TO CORPORATE FORM. UNLESS THE CONTEXT OTHERWISE REQUIRES, "WE,"
"US" AND "OUR" INCLUDES LABRANCHE & CO INC. AND SUBSIDIARIES.

LABRANCHE & CO INC.

Founded in 1924, we are one of the oldest and largest specialist firms on
the New York Stock Exchange. In 1998, the stocks for which we acted as
specialist accounted for approximately 14.2% of the dollar volume of common
stock traded on the NYSE, constituting one of the largest market shares among
specialist firms. As of June 1, 1999, we acted as specialist in 284 common stock
listings, including 47 of the S&P 500 and five of the 30 companies comprising
the Dow Jones Industrial Average. Our five Dow stocks are AT&T, Chevron, Exxon,
Merck and Minnesota Mining & Manufacturing.

All trading of securities on the NYSE is conducted through an auction
process managed by the specialist for each security. The specialist is a
broker-dealer who is granted the franchise by the NYSE to conduct the auction in
particular stocks and is assigned the role to maintain a fair and orderly market
in its specialist stocks. As of June 1, 1999, there were 31 specialist units as
compared with 39 at December 31, 1994. The substantial majority of trades in
NYSE-listed stocks takes place on the floor of the NYSE and is handled by
specialist firms. Specialist firms generate revenues by executing trades, either
as agent or principal, in their specialist stocks.

Our business has grown considerably during the past five years. The total
annual share volume on the NYSE of stocks for which we act as specialist has
increased from approximately 3.4 billion in 1994 to nearly 20.0 billion in 1998,
representing a compound annual growth rate of 55.4%. During the same period, our
annual revenues increased from $29.9 million to $126.4 million, representing a
compound annual growth rate of 43.4%. We have accomplished our growth both
internally and through selective acquisitions. Since the March 1997
implementation of a new NYSE allocation process which allows listing companies
to make the final selection of their specialist, we have added 40 new common
stock listings to our firm. In addition, we have acquired three specialist
operations since 1997, adding 128 new common stock listings to our firm.

Our revenues are primarily driven by the volume of trading on the NYSE. The
NYSE is currently the largest securities market in the world. The market
capitalization of all U.S. shares listed on the NYSE at December 31, 1998 was
approximately $10.9 trillion, representing approximately 80% of the market
capitalization of all shares publicly traded on U.S. national markets. The
NYSE's average daily trading volume increased from 291.4 million shares in 1994,
to 673.6 million shares in 1998, representing a compound annual growth rate of
23.3%. We believe that this increase in NYSE trading volume is due to a number
of factors including:

- an increase in the amount of funds invested in equity securities;

- an increase in the number of NYSE-listed stocks; and

- an increase in the use of computerized trading strategies.

We believe that several changes under consideration by the NYSE, including
longer trading days and trading in decimals, if enacted, will likely contribute
to additional growth in NYSE trading volume.

1
<PAGE>
We believe our success is due to our:

- leading position in the specialist market;

- diverse and high quality specialist stocks;

- strong market-making skills;

- innovative customer-oriented services; and

- recent acquisitions.

Our strategies for growing our revenues and profits are to:

- aggressively pursue new listings;

- actively participate in the consolidation of the specialist industry by
making selective acquisitions; and

- increase our capital base and our access to capital.

2
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common stock offered.............. shares

Common stock to be outstanding
after the offering.............. shares

Use of proceeds................... The estimated net proceeds from this offering will be
approximately $170.0 million. We intend to use the
majority of the net proceeds for general corporate
purposes to support the growth of our business,
including working capital and future acquisitions. In
addition, we will use approximately $57.4 million to
redeem some of the limited partnership interests of our
subsidiary, LaBranche & Co., as part of the
reorganization of our firm from partnership to corporate
form.

Proposed New York Stock Exchange
symbol.......................... LAB
</TABLE>

At approximately the same time as this offering, we will incur indebtedness
of approximately $116.0 million to redeem some limited partnership interests in
LaBranche & Co. and some membership interests in LaB Investing Co. L.L.C., the
general partner of LaBranche & Co., and to repay $5.0 million of subordinated
indebtedness as part of our reorganization.

- ------------------------

The above information excludes (i) shares of common stock subject to
options and (ii) shares of restricted stock granted under our equity
incentive plan. The outstanding options have an exercise price equal to the
initial public offering price.

3
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The summary historical consolidated financial data set forth below for the
years ended December 31, 1996, 1997 and 1998 have been derived from our
consolidated financial statements, which have been audited by Arthur Andersen
LLP, independent public accountants, and are included elsewhere in this
prospectus. The summary historical consolidated financial data set forth below
for the years ended December 31, 1994 and 1995 have been derived from our
consolidated financial statements, audited by Arthur Andersen LLP, independent
public accountants, which are not included elsewhere in this prospectus. The
summary historical financial data set forth below for the quarters ended March
31, 1998 and 1999 have been derived from our unaudited consolidated financial
statements. In our opinion, such unaudited data include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the information set forth therein. The results of operations for
the quarter ended March 31, 1999 are not necessarily indicative of results to be
expected for any future period. The summary historical consolidated financial
data set forth below should be read in conjunction with the consolidated
financial statements and related notes thereto and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," which are
included elsewhere in this prospectus.

Income before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and
unincorporated business taxes............ $ 20,725 $ 26,254 $ 32,783 $ 47,732 $ 91,635 $ 22,236 $ 36,526
--------- --------- --------- --------- ---------- ----------- -----------
--------- --------- --------- --------- ---------- ----------- -----------

OTHER DATA:
Number of our common stock listings........ 122 125 132 202 284 201 282
Total share volume on the NYSE of our
specialist stocks (in billions).......... 3.4 4.0 5.6 10.9 20.0 3.8 6.2
Total dollar volume on the NYSE of our
specialist stocks (in billions).......... $ 112.3 $ 133.3 $ 201.4 $ 476.7 $ 950.4 $ 163.1 $ 331.2
NYSE average daily trading share volume (in
millions)................................ 291.4 346.1 412.0 526.9 673.6 626.4 799.8
</TABLE>

Historically, we have operated as a partnership and have distributed all of
our income after unincorporated business taxes to our managing directors as
compensation and to our partners. Concurrently with this offering, we will
reorganize our firm from partnership to corporate form and in connection with
the reorganization, will redeem limited partnership and membership interests. As
a corporation, we will include payments to managing directors as part of
compensation and benefits. Therefore, historical income before managing
directors' compensation, limited partners' interest in earnings of subsidiary
and unincorporated business taxes understates our expected operating costs after
this offering. See "Reorganization and Related Transactions" and "Summary Pro
Forma Consolidated Financial Data." As a partnership, we generally have not been
subject to U.S. federal, state and local income taxes, apart from unincorporated
business taxes. As part of our reorganization to a corporation, we will be
subject to U.S. federal, state and local income taxes.

4
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA

The pro forma consolidated statement of operations data set forth below for
the year ended December 31, 1998 and the quarter ended March 31, 1999 gives
effect to (1) our July 1998 acquisition of substantially all of the assets of
Fowler, Rosenau & Geary, LLC and (2) the reorganization of our firm from
partnership to corporate form and the related transactions. The pro forma
consolidated statement of operations for the three months ended March 31, 1999
and for the year ended December 31, 1998 presents our results as if the
reorganization and related transactions had occurred on January 1, 1998.
Additionally, the pro forma consolidated statement of operations for the year
ended December 31, 1998 presents our results as if the acquisition of Fowler,
Rosenau had occurred on January 1, 1998. The pro forma consolidated balance
sheet data as of March 31, 1999 gives effect to the reorganization and related
transactions as if they occurred on March 31, 1999. The pro forma as adjusted
consolidated balance sheet data as of March 31, 1999 gives effect to the
reorganization and related transactions as if they occurred on March 31, 1999
and also gives effect to the sale by us of shares of common stock in
this offering at an assumed initial offering price of $ per share, after
deducting the underwriting discount and estimated offering expenses payable by
us, and to the application of the net proceeds from this offering.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 MARCH 31, 1999
------------------------ ------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Net gain on principal transactions.......................... $ 95,048 $ 98,736 $ 36,366 $ 36,366
Commissions................................................. 26,576 33,963 8,270 8,270
Other....................................................... 4,787 5,151 2,985 2,985
----------- ----------- ----------- -----------
Total revenues............................................ 126,411 137,850 47,621 47,621
----------- ----------- ----------- -----------
Expenses:
Employee compensation and benefits.......................... 13,921 41,671(A) 4,741 14,953(A)
Lease of exchange memberships............................... 6,568 7,064 2,073 2,073
Interest.................................................... 3,577 13,927(B) 1,099 3,584(B)
Exchange, clearing and brokerage fees....................... 2,898 3,233 1,007 1,007
Goodwill amortization....................................... 2,526 3,386(C) 847 847
Other operating expenses.................................... 5,286 6,281 1,328 1,328
----------- ----------- ----------- -----------
Total operating expenses.................................. 34,776 75,562 11,095 23,792
----------- ----------- ----------- -----------
Income from operations........................................ 91,635 62,288 36,526 23,829
Managing directors' compensation.............................. 58,783 -- (A) 23,100 -- (A)
----------- ----------- ----------- -----------
Income before limited partners' interest in earnings of
subsidiary and provision for income taxes................... 32,852 62,288 13,426 23,829
Limited partners' interest in earnings of subsidiary.......... 26,292 -- (D) 10,445 -- (D)
----------- ----------- ----------- -----------
Income before provision for income taxes...................... 6,560 62,288 2,981 23,829
Provision for income taxes.................................... 3,900 27,407(E) 1,400 10,485(E)
----------- ----------- ----------- -----------
Net income.................................................... $ 2,660 $ 34,881 $ 1,581 $ 13,344
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic and diluted net income per share (F).................... $ $
----------- -----------
----------- -----------
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
MARCH 31, 1999
------------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- -----------
------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and short-term investments...................................... $ 43,465 $ (13,969)(G) $ 156,031(H)
Working capital...................................................... 113,693 56,259(G) 226,259(H)
Total assets......................................................... 299,338 241,904(G) 411,904(H)
Total long-term indebtedness......................................... 71,158 182,158(B) 182,158
Limited partners' interest in subsidiary............................. 35,373 -- (G) -- (G)
Members' capital/stockholders' equity................................ 85,535 (47,526)(G) 122,474(F)
</TABLE>

- ------------------------

(A) Adjusts compensation and benefits based on new employment policies for
managing directors and reverses the difference between the actual
compensation and benefits paid and the amount which is assumed to be paid to
managing directors.

(B) Reflects the repayment of $5.0 million of subordinated liabilities and
reverses the related interest expense. Reflects the issuance of $116.0
million of long-term indebtedness at an assumed interest rate of 9.0%.

(D) Reflects reversal of limited partners' interest in earnings of subsidiary.

(E) Reflects federal, state and local income taxes at an estimated effective tax
rate of approximately 44% and reverses actual unincorporated business taxes.

(F) Based on weighted average shares outstanding. Excludes (i)
shares of common stock subject to options and (ii) shares of
restricted stock granted under our equity incentive plan.

(G) Reflects the redemption of limited partnership and membership interests for
$168.4 million, comprised of $157.4 million in cash and a net increase of
$11.0 million of subordinated indebtedness.

(H) Reflects net proceeds of $170.0 million to be received upon completion of
this offering.

6
<PAGE>
RISK FACTORS

YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY
OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY
ONES THAT OUR COMPANY FACES. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY
KNOWN TO US MAY ALSO ADVERSELY IMPACT OUR BUSINESS OPERATIONS. IF ANY OF THE
FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND OPERATING
RESULTS COULD BE ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID
TO PURCHASE OUR COMMON STOCK.

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT
EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT OUR COMPANY AND OUR
INDUSTRY. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. OUR
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-
LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS DESCRIBED IN THIS SECTION AND
ELSEWHERE IN THIS PROSPECTUS. WE UNDERTAKE NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES
AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.

OUR REVENUES MAY DECREASE DUE TO CHANGES AFFECTING THE ECONOMY, THE SECURITIES
MARKETS OR TRADING VOLUME.

We recently experienced a substantial increase in the revenues we earn from
our specialist activities. This was caused primarily by significant increases in
the volume of trading on the NYSE and favorable conditions in the securities
markets. A number of related external factors have contributed to these
favorable conditions, including:

- a strong U.S. economy;

- low interest rates;

- low levels of inflation;

- higher levels of equity investments and trading activity by retail and
institutional investors;

- favorable market performance; and

- high levels of new listings and equity issuance activity.

The current favorable business environment will not continue indefinitely.
An adverse change in the factors listed above could result in a decline in
market volume or liquidity, which generally results in lower revenues from
specialist activities and lower price levels of securities. Sustained declines
in these price levels may result in:

- losses from declines in the market value of securities held in our
inventory;

- the failure of buyers and sellers of securities to fulfill their
settlement obligations; and

- increases in claims and litigation.

Further, the recent strong market for new equity offerings is volatile and
the number and size of equity offerings may decline during periods of market
uncertainty. This decline might be caused by a number of factors, including
lower market price levels, concerns over inflation, rising interest rates or
other general economic issues or a reduction of cash flows into mutual funds by
institutional and retail investors. A decline in the number and size of new
equity offerings or in the trading volume of these equities in the secondary
market would also reduce our trading revenues.

TRADING THROUGH NYSE SPECIALISTS COULD BE REPLACED BY ALTERNATIVE TRADING
SYSTEMS.

Over the past few years, a number of alternative trading systems have
developed or emerged which may compete with specialists by increasing trading in
NYSE listed stocks off the NYSE trading floor in over-the-counter markets. In
the future, similar new systems may continue to be developed and placed

7
<PAGE>
in operation. NYSE-listed stocks may be traded off the exchange, and thus
without the participation of a specialist:

- by NYSE members over-the-counter, as long as the stocks were listed after
April 26, 1979. Approximately 70.0% of the NYSE listed stocks may be
traded by NYSE members over-the-counter; and

- by non-NYSE members over-the-counter.

Technological advances have also contributed to the recent and continuing
emergence of trading through alternative trading systems, including electronic
communications networks and crossing systems. In April 1999, the SEC adopted a
rule which allows, and in specified cases requires, these networks to register
and become subject to regulation as stock exchanges. This would enable NYSE
members to trade all NYSE-listed stocks on these networks, regardless of when
the stocks were originally listed. These networks may be developed, organized
and operated by large brokerage houses and investment banks with greater
capital, better access to new technology and direct access to investors. As a
result, these parties may be well positioned to direct trading to these
networks. Future systems may be more successful than those operating to date.
Alternative trading systems could reduce the levels of trading of NYSE-listed
stocks executed through specialists. This, in turn, could have an adverse effect
on our revenues.

THE NYSE FACES COMPETITION FROM NASDAQ FOR NEW LISTINGS.

Nasdaq continues to grow and gain in popularity, attracting companies which
might otherwise have listed on the NYSE. Particularly, in recent years, many
high technology companies have opted to be quoted on Nasdaq, even though many of
them would have qualified for NYSE listing. In addition, in late 1997, the NYSE
Board of Directors proposed a revision to Rule 500 which would make it easier
for a company to delist its shares from the NYSE. The current rule requires
supermajority shareholder approval before a listed company may delist from the
NYSE. Under the proposed amendment of Rule 500, a company could delist from the
NYSE if it obtains the approval of a majority of the company's board of
directors and the company's audit committee. The company would then provide its
35 largest shareholders with notice of the proposed delisting and allow a 20-40
day waiting period to elapse. The proposal has been submitted to the SEC for
comment and approval. If more companies decide to be quoted on Nasdaq as opposed
to listing their stocks on the NYSE, or if companies choose to delist using the
proposed relaxed delisting procedures, trading volume on the NYSE could be
adversely affected. This, in turn, could adversely affect our trading revenue.

OUR BUSINESS IS HIGHLY VOLATILE AND OUR QUARTERLY RESULTS MAY FLUCTUATE
SIGNIFICANTLY.

We recently experienced a significant increase in our annual revenues and
net income primarily as a result of significant increases in the volume of
trading on the NYSE and favorable conditions in the securities markets. We
cannot be sure, however, that we will continue to experience increases in our
revenues and net income. For example, in the third quarter of 1998, compared to
the second quarter of 1998, we experienced a decline in revenues primarily due
to a decline in our net trading gains from principal transactions conducted as
part of our specialist activities. Our net trading gains from principal
transactions decreased during this period primarily because the price levels of
many of our specialist stocks declined. As a result of our specialist
obligations, in some cases we were required to continue buying our specialist
stocks during these periods as their prices declined, which adversely affected
our revenues. Our operating results may fluctuate significantly in the future
because of a number of factors, including:

- a decrease in the trading volume on the NYSE;

- volatility in the equity securities markets;

- the use of alternative trading systems, such as electronic communications
networks;

8
<PAGE>
- competition from Nasdaq for new listings;

- changes in the value of our securities positions and in our ability to
manage related risks;

- lower success in obtaining new listings through the NYSE allocation
process;

- our ability to manage personnel, overhead and other expenses;

- the loss of trading professionals;

- regulatory changes and compliance issues;

- our ability to effectively utilize our capital;

- costs associated with acquisitions; and

- general market and economic conditions.

Our expense structure is based upon historical expense levels and the levels
of demand for our services. If our expenses increase or demand for our services
declines and we are unable to adjust our cost structure on a timely basis, we
could suffer losses. Due to these factors, period-to-period comparisons of our
revenues and operating results are not necessarily meaningful. You should not
rely on these comparisons as indicators of our future performance. We also
cannot be sure that we will be able to:

- sustain the rates of revenue and earnings growth that we have experienced
in the past;

- improve our operating results; or

- sustain our profitability on a quarterly basis.

In addition, our operating results in future periods may be below the
expectations of securities analysts and investors. In that event, the market
price of our common stock would drop.

WE FACE RISKS ASSOCIATED WITH OUR TRADING TRANSACTIONS.

A majority of our specialist-related revenues are derived from trading by us
as principal. We also operate a proprietary trading desk separately from our
NYSE specialist operations, which represented 1.8% of our total revenues in
1998. Each of these activities primarily involves the purchase, sale or short
sale of securities for our own account. These activities are subject to a number
of risks, including risks of price fluctuations and rapid changes in the
liquidity of markets. In any period, we may incur trading losses in a
significant number of our specialist stocks for a variety of reasons, including
price declines of our specialist stocks, lack of trading volume in our
specialist stocks and the required performance of our specialist obligations.
From time to time, we have large position concentrations in securities of a
single issuer or issuers engaged in a specific industry. In general, because our
inventory of securities is marked to market on a daily basis, any downward price
movement in these securities will result in a reduction of our revenues and
operating profits.

The success of our principal trading related to our specialist activities
and to our proprietary trading desk depends on:

- the price volatility of specific securities;

- the skill of our personnel;

- the availability of capital; and

- general market conditions.

Although we have adopted risk management policies, we cannot be sure that
these policies have been formulated properly to identify or limit our risks.
Even if these policies are formulated properly, we cannot be sure that we will
successfully implement these policies. As a result, we may not be able to manage
our risks successfully or avoid trading losses.

9
<PAGE>
NYSE RULES THAT GOVERN OUR ACTIVITY AS A SPECIALIST MAY ADVERSELY AFFECT OUR
TRADING REVENUES.

When we trade as principal, we attempt to derive a profit from the
difference between the prices at which we buy and sell securities. However, our
role as a specialist, at times, requires us to make trades that adversely affect
our profitability. In addition, as a specialist, we are at times required to
refrain from trading for our own account in circumstances in which it may be to
our advantage to trade. For example, we may be obligated to act as a principal
when buyers or sellers outnumber each other. In those instances, we may take a
position counter to the market, buying or selling shares to support an orderly
market in the affected stocks. In order to perform these obligations, we hold
varying amounts of securities in inventory. In addition, specialists generally
may not trade for their own account when public buyers are meeting public
sellers in an orderly fashion and may not compete with public orders at the same
price. By having to support an orderly market, maintain inventory positions and
refrain from trading under some favorable conditions, we are subjected to a high
degree of risk. The rules governing our activities as a specialist may cause us
to suffer trading losses. Additionally, the NYSE periodically amends its rules
and may make the rules governing our activities as a specialist more stringent
or may implement changes which could adversely affect our trading revenues. See
"Business--Operations--NYSE Rules Governing Our Specialist Activities."

WE WILL INCUR A SUBSTANTIAL AMOUNT OF INDEBTEDNESS AT APPROXIMATELY THE SAME
TIME AS THIS OFFERING.

At approximately the same time as this offering, we will incur indebtedness
of approximately $116.0 million to redeem some limited partnership interests in
LaBranche & Co. and some membership interests in LaB Investing and to repay
subordinated indebtedness as part of the reorganization of our firm from
partnership to corporate form. As a result of this indebtedness, we will add
substantial leverage to our capital structure. A severe protracted business
downturn could prevent us from obtaining the cash we will need to make timely
payments on our debt. This could occur, for example, if our revenues declined or
our expenses increased relative to our revenues. Similarly, our available cash
could be reduced if we were unable to sell securities or other assets that we
hold as needed. A significant and sustained reduction in the cash available to
us could make it difficult for us to meet the payment obligations on our debt in
a timely manner.

In addition, because we, LaBranche & Co Inc., are a newly formed holding
company with no operations of our own, we are dependent on distributions from
LaBranche & Co. and LaB Investing to pay interest and principal on our debt. We
are effectively subordinated to all of the creditors of and lenders to LaBranche
& Co. and LaB Investing, including lenders of subordinated debt. This structural
subordination may adversely affect our ability to service our debt and could
result in insolvency or other circumstances that could adversely affect the
price of our common stock.

Further, LaBranche & Co. is a broker-dealer and a specialist regulated by
the Securities and Exchange Commission and the NYSE. Such regulation includes
strict rules regarding capital requirements and approval requirements for
withdrawal of capital from and, in some cases, other distributions, by the
broker-dealer. These regulations could prevent us from obtaining funds necessary
to satisfy our obligations to pay interest on or repay our indebtedness. See
"--We are subject to net capital requirements" and
"Business--Operations--Regulatory Matters" for a discussion of net capital
requirements.

WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS OR OUR ABILITY TO SECURE ADDITIONAL
FINANCING.

Our business depends on the availability of adequate capital in order to:

- attract new listing companies;

- conduct principal trading related to our specialist activities;

- maintain an inventory of our specialist stocks; and

- comply with regulatory requirements.

10
<PAGE>
Historically, we have satisfied these needs with internally generated funds,
our bank credit facilities and the issuance of subordinated debt. We currently
anticipate that the net proceeds from this offering and our contemplated
indebtedness, together with our available cash resources and credit facilities,
will be sufficient to meet our anticipated working capital, regulatory capital
and capital expenditure requirements through the end of 2000.

We may, however, need to raise additional funds to:

- increase the capital available to us for our inventory positions;

- support more rapid expansion;

- acquire complementary businesses; or

- respond to unanticipated capital requirements.

We may be required to obtain this additional financing on short notice as a
result of rapid, unanticipated developments, such as a steep market decline. We
cannot be sure that additional financing will be available on a timely basis, or
on terms favorable to us. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity."

OUR SUCCESS DEPENDS ON OUR ABILITY TO ACCURATELY PROCESS AND RECORD OUR
TRANSACTIONS.

Our specialist activities require us to accurately record and process a very
large number of transactions on a daily basis. In order to do this we rely on
our staff to operate and maintain our information and communications systems
properly, and we depend on the integrity and performance of those systems. Our
recording and processing of trades is subject to human and processing errors.
Moreover, extraordinary trading volume or other events could cause our
information and communications systems to operate at an unacceptably low speed
or even fail. Any significant degradation or failure of our information systems
or any other systems in the trading process could cause us to fail to complete
transactions or could cause brokers who place trades through us to suffer delays
in trading. These failures or delays could cause substantial losses for brokers,
their customers and/or us and could subject us to claims for losses. Our systems
may also fail as a result of:

- hardware or software failure;

- fire or other natural disaster;

- power or telecommunications failure; or

- war or terrorism.

We have established a back-up disaster recovery center in Hoboken, New
Jersey in the event of a local disaster. Nevertheless, any information or
communications system failure or decrease in information or communications
systems performance that causes interruptions in our operations could have an
adverse effect on our business, financial condition and/or operating results.

We are also dependent on the proper and timely function of complex
information and communications systems maintained and operated by or for the
NYSE and clearing and depository institutions. Failures or inadequate or slow
performance of any of those systems could adversely affect our ability to
operate.

OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO UPGRADE OUR INFORMATION AND
COMMUNICATIONS SYSTEMS.

The development of complex communications and new technologies, including
Internet-based technologies, may render our existing information and
communications systems outdated. In addition, our information and communications
systems must be compatible with those of the NYSE. As a result, if the NYSE
upgrades its systems, we will need to make corresponding upgrades. Our future
success will depend on our ability to respond to changing technologies on a
timely and cost-effective basis. We cannot be sure that we will be successful in
upgrading our information and communications systems on

11
<PAGE>
a timely or cost-effective basis. Our failure to do so could have an adverse
effect on our business, financial condition and/or operating results.

The NYSE's ability to develop information and communications systems and
complex computer and other technology systems has been instrumental in its
recent growth and success. We are dependent on the continuing development of
technological advances by the NYSE, a process over which we have no control. If
the NYSE for any reason is unable to continue its recent history of
computer-related and other technological developments and advances, it could
have an adverse affect on the success of the NYSE, including its ability to
grow, to manage its trading volumes or to attract new listings. Any such
developments can be expected to adversely affect our operations, financial
condition and operating results.

WE DEPEND ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL.

Our future success depends on the continued service of key employees,
particularly George M.L. LaBranche, IV (Michael LaBranche), our chairman and
chief executive officer. We have entered into employment agreements with Mr.
LaBranche and other key employees. We also maintain "key person" life insurance
policies on Mr. LaBranche and other key employees. Competition for key personnel
and other highly qualified management, trading, compliance and technical
personnel is intense. We cannot assure you that we will be able to attract new
or retain currently employed highly qualified personnel in the future. The loss
of the services of any of our key personnel or the inability to identify, hire,
train and retain other qualified personnel in the future could have an adverse
effect on our business, financial condition and/or operating results. See
"Management--Employment Agreements and Non-Competition Agreements."

From time to time, other companies in the securities industry have
experienced losses of trading professionals. The level of competition to attract
these professionals is intense. In connection with this offering and the
reorganization of our firm from partnership to corporate form, employees who are
not managing directors will receive grants of restricted stock, restricted stock
units and stock options. The incentives to attract, retain and motivate
employees provided by these awards or by future arrangements may not be as
effective as the opportunity, which existed prior to our reorganization, to
become a partner in LaBranche & Co. We cannot assure you that we will not lose
professionals due to increased competition or other factors in the future. The
loss of a trading professional, particularly of a senior professional with broad
industry expertise, could have an adverse effect on our business, financial
condition and/or operating results.

In connection with this offering and the reorganization of our firm from
partnership to corporate form, our managing directors will receive substantial
amounts of our common stock in exchange for their current interests in LaB
Investing. Because these shares of common stock will be received in exchange for
membership interests, ownership of these shares will not be dependent upon the
continued employment of those managing directors. However, these shares will be
subject to certain restrictions on transfer under a stockholders' agreement and
a portion will be pledged to secure our managing directors' obligations under
noncompetition agreements. See "Certain Transactions-- Reorganization and
Related Transactions--Stockholders' Agreement." The steps we have taken to
encourage the continued service of these individuals after this offering, who
include key senior personnel in our specialist activities, may not be effective.
For a description of the compensation plan for our employees to be implemented
after this offering, see "Management--Executive Compensation" and "Incentive
Awards to Our Employees."

12
<PAGE>
WE DEPEND SIGNIFICANTLY ON REVENUES FROM OUR SPECIALIST ACTIVITIES FOR A SMALL
GROUP OF LISTED COMPANIES.

Historically, a small number of listed companies have accounted for a
significant portion of our revenues from our specialist trading activities. For
the years ended December 31, 1997 and 1998, transactions in our 10 most actively
traded specialist stocks accounted for 35.0% and 39.0% of our total revenues,
respectively. For the quarter ended March 31, 1999, our revenues from
transactions in our 10 most actively traded specialist stocks accounted for
approximately 38.0% of our total revenues. We cannot assure you that we will be
able to retain these or other listed companies. We can lose these listed
companies if they cease to be traded on the NYSE as a result of being acquired
or otherwise delisted. In addition, if the NYSE were to determine that we have
failed to fulfill our obligations as specialist for a listed company, our
registration as a specialist for that listed company could be canceled or
suspended. The loss of any of these listed companies could have an adverse
effect on our revenues.

WE DEPEND ALMOST ENTIRELY ON OUR SPECIALIST ACTIVITIES.

We derive substantially all of our revenues from specialist activities. We
expect our specialist activities to continue to account for substantially all of
our revenues for the foreseeable future. Our future success will depend on:

- continued growth in the volume of trading and the number of listings on
the NYSE;

- our ability to be chosen as specialist for additional listing companies;

- our ability to respond to regulatory and technological changes; and

- our ability to respond to changing demands in the marketplace.

If demand for our specialist services fails to grow, grows more slowly than
we currently anticipate, or declines, our revenues would be adversely affected.

WE ARE SUBJECT TO INTENSE COMPETITION FOR NEW LISTINGS.

We obtain all of our new listings on the NYSE by going through an allocation
process. Under this process either a committee of the NYSE or the listing
company chooses the specialist. The competition for obtaining new listing
companies is intense. We expect competition to continue and to intensify in the
future. Some of our competitors may have significantly greater financial and
other resources than we have and may have greater name recognition. These
competitors may be able to respond more quickly to new or evolving opportunities
and listing company requirements. They may also be able to undertake more
extensive promotional activities to attract new listing companies. In addition,
the specialist industry has recently been consolidating. The combined companies
resulting from this consolidation may have a stronger capital base. This trend
has intensified the competition in our industry. Finally, the NYSE retains the
ability to name new specialist firms.

We cannot be sure that we will be able to compete effectively with current
or future competitors or that the competitive pressure we face will not have an
adverse effect on our business, financial condition and/or operating results.

WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.

Since 1994, we have experienced significant growth in our business
activities and the number of our employees. The growth of our business has
increased the demands upon our management and operations and we expect it to
continue to do so in the future. This growth has required, and will continue to
require, us to increase our investment in management personnel, financial and
management systems and controls, and facilities. In the absence of continued
revenue growth, the costs associated with our expected growth would cause our
operating margins to decline from current levels. The scope of procedures for
assuring compliance with applicable rules and regulations has changed as the
size and

13
<PAGE>
complexity of our business has increased. In response, we have implemented
formal compliance procedures which are regularly updated. Our future operating
results will depend on our ability to continue:

- to improve our systems for operations, financial control, and
communication and information management;

- to refine our compliance procedures and enhance our compliance oversight;
and

- to recruit, train, manage and retain our employees.

We cannot assure you that we will be able to manage our growth successfully.
Our inability to do so could have an adverse effect on our business, financial
condition and/or operating results.

WE FACE RISK ASSOCIATED WITH THE YEAR 2000.

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish between 21(st) century
dates and 20(th) century dates. As a result, computer systems and/or software
used by many companies and governmental agencies, including computers involved
in the securities industry, may need to be upgraded to comply with such Year
2000 requirements. Otherwise, these systems could suffer system failure or
miscalculations that would disrupt normal business activities. Significant
uncertainty exists concerning the potential effects associated with the failure
to achieve compliance with Year 2000 requirements.

We have made an assessment of the Year 2000 readiness of our
trading-related, communications and data processing systems. We participated in
the Securities Industry Association "streetwide" testing during the period of
February 1999 through April 1999. We believe that our main trading-related and
clearing systems are currently Year 2000 compliant. In addition, the NYSE has
assured us that their information and communications systems are Year 2000
compliant. We require vendors of material hardware and software components of
our information technology systems to provide assurances of their Year 2000
compliance. We have assessed the materiality of our non-information technology
systems and have obtained assurances of Year 2000 compliance from providers of
material non-information technology systems.

We cannot be sure that we will not discover Year 2000 compliance problems
that will require substantial revisions. In addition, we cannot be sure that
third-party software, hardware or services incorporated into our computer
systems will not need to be revised or replaced. This could be time-consuming
and expensive. If we fail to fix our trading-related, communications or data
processing systems or to fix or replace third-party software, hardware or
services on a timely basis, our business, financial condition and/or operating
results could be adversely affected. Moreover, our failure to address adequately
Year 2000 compliance issues in our main trading-related, communications or data
processing systems could result in litigation which could be a costly and
time-consuming process.

In addition, we cannot assure you that the NYSE, trading counterparties,
governmental agencies, utility companies, third-party service providers,
including clearing agencies and depositories, and others outside our control,
particularly other broker-dealers, will be Year 2000 compliant. The failure by
any of these entities to be Year 2000 compliant could result in a systemic
failure beyond our control, including:

- a loss or reduction in our trading volume;

- limitations on our ability to effectively engage in specialist activities;
or

- prolonged telecommunications or electrical failure.

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<PAGE>
The occurrence of any systemic failure, including those listed above, could
prevent us from engaging in specialist activities and could have an adverse
effect on our business, financial condition and/or operating results.

WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION.

The securities industry is subject to extensive regulation under both
federal and state laws. In addition, the SEC, NYSE, other self-regulatory
organizations, commonly referred to as SROs, and state securities commissions
require strict compliance with their respective rules and regulations. These
regulatory bodies are responsible for safeguarding the integrity of the
securities markets and protecting the interests of participants in those
markets. As a specialist, we are subject to regulation concerning certain
aspects of our business, including:

- trading practices;

- capital structure;

- record retention; and

- the conduct of our directors, officers and employees.

Failure to comply with any of these laws, rules or regulations could result
in serious adverse consequences. We and our officers and employees may be
subject in the future to claims arising from acts in contravention of these
laws, rules and regulations. An adverse ruling against us and/or our officers
and other employees as a result of any of these claims could result in us and/or
our officers and other employees being required to pay a substantial fine or
settlement and could result in suspension or expulsion. This could have an
adverse effect on our business, financial condition and/or operating results.

The regulatory environment in which we operate is subject to change. New or
revised legislation or regulations imposed by the SEC, other U.S. or foreign
governmental regulatory authorities and SROs, including the NYSE, could have an
adverse effect on our business, financial condition and/or operating results.
Changes in the interpretation or enforcement of existing laws and rules by the
SEC, these governmental authorities, SROs and the NYSE could also have an
adverse effect on our business, financial condition and operating results.

Additional regulation, changes in existing laws and rules, or changes in
interpretations or enforcement of existing laws and rules often directly affect
securities firms. We cannot predict what effect any such changes might have. Our
business, financial condition and/or operating results may be adversely affected
by both regulations that are directly applicable to us, as well as those that
are generally applicable. Our level of trading and the success of specialist
activities can be affected not only by such legislation or regulations of
general applicability, but also by industry-specific legislation and/or
regulations. See "Business--Operations--Regulatory Matters."

WE ARE SUBJECT TO NET CAPITAL REQUIREMENTS.

The SEC, the NYSE and various other regulatory agencies have stringent rules
with respect to the maintenance of specific levels of regulatory capital by
securities brokers-dealers as well as specialist firms. These rules include SEC
Rule 15c3-1 and NYSE Rules 325 and 104.2. These capital rules govern minimum
levels of capital for our subsidiary, LaBranche & Co., which operates as a
specialist. Failure to maintain compliance with required minimum capital levels
may subject us to suspension or revocation of registration by the SEC and
suspension or expulsion by the NYSE and other regulatory bodies. In addition, a
change in these capital rules, the imposition of new capital rules or any
unusually large requirement or charge against our regulatory capital could limit
any of our operations that require the intensive use of capital. These rules
could also restrict our ability to withdraw capital from

15
<PAGE>
LaBranche & Co. Any limitation on our ability to withdraw capital from LaBranche
& Co. could limit our ability to receive distributions from LaBranche & Co. and
LaB Investing, which, in turn, could limit our ability to pay cash dividends,
repay debt and repurchase shares of our outstanding stock. A substantial market
decline, a significant operating loss or any unusually large requirement or
charge against regulatory capital could adversely affect our ability to expand
or even maintain our present levels of business, which could have an adverse
effect on our business, financial condition and/or operating results. See
"Business--Operations--Regulatory Matters."

EMPLOYEE MISCONDUCT COULD HARM US AND IS DIFFICULT TO DETECT AND DETER.

There have been a number of highly publicized cases involving fraud, stock
manipulation or other misconduct by employees in the financial services industry
in recent years, and we run the risk that employee misconduct could occur.
Misconduct by employees could include binding us to transactions that exceed
authorized limits or present unacceptable risks, or hiding from us unauthorized
or unsuccessful activities, which, in either case, may result in unknown and
unmanaged risks or losses. Employee misconduct could also involve the improper
use or disclosure of confidential information, which could result in regulatory
sanctions and serious reputational or financial harm. It is not always possible
to deter employee misconduct and the precautions we take to prevent and detect
this activity may not be effective in all cases.

WE ARE SUBJECT TO RISK RELATING TO LITIGATION AND POTENTIAL SECURITIES LAWS
LIABILITY.

Many aspects of our business involve substantial risks of liability. A
specialist is exposed to substantial risks of liability under federal and state
securities laws, other federal and state laws and court decisions, as well as
rules and regulations promulgated by the SEC and the NYSE. We are also subject
to the risk of litigation and claims that may be without merit. We could incur
significant legal expenses in defending ourselves against such lawsuits or
claims. An adverse resolution of any future lawsuits or claims against us could
have an adverse effect on our business, financial condition and/or operating
results.

COUNTERPARTIES MAY FAIL TO PAY US.

As a specialist of listed stocks, the majority of our securities
transactions are conducted as principal with broker-dealer counterparties
located in the United States. The NYSE and the clearing houses monitor the
credit standing of the counterparties with which we conduct business. However,
we cannot assure you that any of these counterparties will not default on their
obligations. If any do, our business, financial condition and/or operating
results could be adversely affected.

CONCENTRATION OF OWNERSHIP.

Our managing directors will own approximately % of our outstanding
common stock. These stockholders have entered into a stockholders' agreement
under which they have agreed, among other things, that their shares of our
common stock will be voted, for as long as they own their shares, as instructed
by Michael LaBranche, our chairman and chief executive officer, James G.
Gallagher and Alfred O. Hayward, Jr., each an executive officer and director.
Accordingly, these individuals will have the ability to control all matters
requiring approval by our stockholders. These matters include the election and
removal of directors and the approval of any merger, consolidation or sale of
all or substantially all of our assets. In addition, they will be able to
dictate the management of our business and affairs. This concentration of
ownership could have the effect of delaying, deferring or preventing a change in
control, a merger or consolidation, a takeover or another business combination.

16
<PAGE>
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE.

Prior to this offering, there has been no public market for our common
stock. Although we will make application for listing our common stock on the
NYSE, there can be no assurance that an active trading market will be created or
sustained. The initial public offering price will be determined by negotiations
among ourselves and representatives of the underwriters based on several factors
and will not necessarily reflect the market price of our common stock following
the offering. Due to the absence of any prior public market for the shares of
our common stock, there can be no assurance that the initial public offering
price will correspond to the price at which the shares of common stock will
trade in the public market subsequent to the offering.

FUTURE SALES BY EXISTING STOCKHOLDERS COULD DEPRESS THE MARKET PRICE OF OUR
COMMON STOCK.

If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Such sales also might make it more difficult for us to sell equity
securities in the future at a time and price that we deem appropriate. After
this offering, we will have outstanding shares of common stock. Under SEC
rules, these shares are eligible for sale in the public market as follows:

In connection with the reorganization of our firm from partnership to
corporate form, our managing directors and limited partners who are exchanging
their interests for our common stock have agreed that they will not sell their
common stock for various time periods after this offering. These shares are
eligible for sale in the public market as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
.................................................. One year after the closing of this offering.
.................................................. Two years after the closing of this offering.
.................................................. Three years after the closing of this offering.
.................................................. Four years after the closing of this offering.
.................................................. Five years after the closing of this offering.
</TABLE>

In addition:

- each of our managing directors must retain 25% of his or her common stock,
currently totaling shares in the aggregate, for the duration of his
or her employment; and

- an employee may not sell shares of our common stock that are subject to a
pledge agreement, unless the requirements of the pledge agreement are
waived by us.

Our directors, officers and stockholders have agreed that they will not
sell, directly or indirectly, any common stock without the prior written consent
of Salomon Smith Barney Inc. for a period of 180 days from the date of this
prospectus.

We intend to file a Form S-8 registration statement under the Securities Act
to register shares of common stock issuable under our stock option plans.
The registration statement will become effective immediately on filing. Shares
covered by that registration statement are eligible for sale in the public
markets, subject to Rule 144 limitations applicable to affiliates.

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<PAGE>
THE TANGIBLE BOOK VALUE OF THE COMMON STOCK WILL BE SUBSTANTIALLY LOWER THAN THE
OFFERING PRICE.

The initial public offering price will be substantially higher than the pro
forma tangible book value per share of our outstanding common stock. If you
purchase our common stock in this offering, the shares you buy will experience
an immediate and substantial dilution in tangible book value per share. The
shares of common stock owned by existing stockholders will receive a material
increase in the tangible book value per share. The dilution to investors in this
offering will be approximately per share. As a result, if we were to
distribute our tangible assets to our stockholders immediately following this
offering, purchasers of shares of common stock in this offering would receive
less than the amount they will have paid for such shares. See "Dilution."

EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT THE ACQUISITION OF OUR
COMPANY.

Some of the provisions of our certificate of incorporation, our by-laws and
Delaware law could, together or separately:

- discourage potential acquisition proposals;

- delay or prevent a change in control; and

- limit the price that investors might be willing to pay in the future for
shares of our common stock.

In particular, our board of directors may issue up to shares of
preferred stock with rights and privileges that might be senior to our common
stock, without the consent of the holders of the common stock. Our certificate
of incorporation and by-laws will provide, among other things, that our board of
directors will be divided into three classes which will serve staggered three
year terms, that stockholders may not take actions by written consent and that
special meetings of stockholders may only be called by our board of directors or
our chairman. We are also subject to Section 203 of the Delaware General
Corporation Law which generally prohibits a Delaware corporation from engaging
in any of a broad range of business combinations with any interested stockholder
for a period of three years following the date on which the stockholder became
an interested stockholder.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the shares of
common stock offered by us, at an assumed initial public offering price of
$ per share, and after deducting underwriting discounts and commissions
and other estimated offering expenses, will be approximately $170.0 million
($195.8 million if the underwriters' over-allotment option is exercised in
full).

The principal purpose of this offering is to provide more permanent capital
to support the growth of our specialist business. In addition, approximately
$57.4 million of the net proceeds will be used to redeem some limited
partnership interests in LaBranche & Co. as part of the reorganization of our
firm from partnership to corporate form. We may also use the remaining net
proceeds of this offering to pursue selective acquisitions of other specialist
firms. We do not have any commitments or agreements with respect to any
acquisitions. Our management will retain broad discretion in the allocation of
the remaining net proceeds of this offering. Pending such uses, we intend to
invest these proceeds in short-term, investment grade, interest-bearing
securities.

DIVIDEND POLICY

We currently anticipate that we will retain any future earnings for the
development and operations of our specialist business. Accordingly, we do not
anticipate paying cash dividends on our capital stock in the foreseeable future.

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<PAGE>
REORGANIZATION AND RELATED TRANSACTIONS

We, LaBranche & Co Inc., are a newly formed holding corporation, and after
giving effect to a number of transactions to be effected concurrently with this
offering, our assets will consist solely of our ownership interests in our
subsidiaries, LaBranche & Co. and LaB Investing, the general partner of
LaBranche & Co. The reorganization of our firm from partnership to corporate
form, as illustrated below, will be effected through the transactions summarized
below:

[GRAPHIC]

- The members of LaB Investing have agreed, subject to the completion of
this offering, to exchange their membership interests in LaB Investing for
an aggregate of shares of our common stock. In addition, three members
of LaB Investing will receive an aggregate of $10.0 million in cash as
part of the exchange. We thus will become the sole member of LaB
Investing, and LaB Investing will continue to be the general partner of
LaBranche & Co.

- The limited partners of LaBranche & Co., other than Mill Bridge, Inc.,
have agreed, subject to the completion of this offering, to exchange their
limited partnership interests in LaBranche & Co. for an aggregate of $68.4
million in cash and shares of our common stock.

- Mill Bridge, Inc., a subsidiary of Van der Moolen Holding NV, will receive
$90.0 million from us in exchange for its limited partnership interest in
LaBranche & Co., including $74.0 million in cash upon the closing of this
offering and our subordinated note for $16.0 million. In addition, we will
repay $5.0 million of subordinated debt to an affiliate of Van der Moolen
Holding NV upon the closing of this offering.

- As a result of the above transactions, we will become the sole limited
partner of LaBranche & Co., which will continue to operate as a
broker-dealer and a NYSE specialist firm.

- We will grant options to purchase an aggregate of shares of our
common stock and shares of our restricted stock (or restricted
units) to employees who are not managing directors.

19
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of March 31, 1999:

(1) on an actual basis;

(2) on a pro forma basis to give effect to the reorganization of our firm
from partnership to corporate form and the related transactions described under
"Reorganization and Related Transactions," as if they had occurred on March 31,
1999; and

(3) on a pro forma as adjusted basis to give further effect to the sale by
us of shares of common stock in this offering at an assumed initial
offering price of $ per share, after deducting the underwriting discount
and estimated offering expenses payable by us, and the application of the
proceeds from the offering.

The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical and pro forma financial statements and notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
------------------------------------
<S> <C> <C> <C>
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
---------- ----------- -----------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term indebtedness, including current portion........................ $ 71,158 $ 182,158 $ 182,158
Limited partners' interest in subsidiary................................. 35,373 -- --
Members' capital for LaB Investing Co. L.L.C............................. 85,535 -- --
Stockholders' equity
Preferred stock, $.01 par value, shares authorized; none issued and
outstanding historical, pro forma and pro forma as adjusted..........
Common stock, $.01 par value, shares authorized; shares issued and
outstanding, pro forma; shares issued and outstanding, pro forma as
adjusted.............................................................
Additional paid-in-capital.............................................
Retained earnings......................................................
---------- ----------- -----------
Total stockholders' equity............................................... -- (47,526) 122,474
---------- ----------- -----------
Total capitalization..................................................... $ 192,066 $ 134,632 $ 304,632
---------- ----------- -----------
---------- ----------- -----------
</TABLE>

- ------------------------

The above information excludes (i) shares of common stock subject to options
and (ii) shares of restricted stock granted under our Equity Incentive Plan.
The outstanding options have an exercise price equal to the initial public
offering price.

20
<PAGE>
DILUTION

The pro forma net tangible book value of LaBranche & Co Inc. as of March 31,
1999, was approximately $ , or $ per share of common stock. Pro forma
net tangible book value per share is equal to the amount of tangible net assets
of LaBranche & Co Inc., less total liabilities, divided by the pro forma number
of shares of common stock outstanding as of March 31, 1999. Assuming the sale by
LaBranche & Co Inc. of the shares of common stock offered hereby (assuming an
initial public offering price of $ per share) and the application of the
net proceeds from this offering, the pro forma net tangible adjusted book value
of LaBranche & Co Inc. at March 31, 1999 would have been approximately $ ,
or $ per share of common stock. This amount represents an immediate
increase in pro forma net tangible book value of $ per share to existing
stockholders and an immediate dilution in net tangible book value of $ per
share to new investors in the common stock in the offering. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................ $

Pro forma net tangible book value per share at March 31, 1999.......... $

Increase per share attributable to new investors....................... $
---------

Pro forma net tangible book value per share after the offering.........
---------

Dilution per share to new investors.................................... $
---------
---------
</TABLE>

The following table summarizes, on a pro forma basis as of March 31, 1999,
the total number of shares of common stock purchased from LaBranche & Co Inc.,
the total consideration paid to LaBranche & Co Inc., and the average price per
share paid by existing stockholders of LaBranche & Co Inc. and by new investors
purchasing shares from LaBranche & Co Inc. in the offering, at an assumed
initial public offering price of $ per share, before deducting underwriting
discounts and commissions and the estimated offering expenses payable by
LaBranche & Co Inc.:

<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED AVERAGE
---------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>

Existing stockholders.......................................... % $ % $

New investors..................................................
--------- --- --------- ---

Total.......................................................... % $ %
--------- --- --------- ---
--------- --- --------- ---
</TABLE>

If the underwriters' over-allotment option is exercised in full, the number
of shares of common stock held by existing stockholders will be reduced to %
of the total number of shares of common stock to be outstanding after this
offering, and will increase the number of shares of common stock held by the new
investors to % of the total number of shares of common stock to be outstanding
immediately after this offering.

21
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below for the years ended
December 31, 1996, 1997 and 1998 and as of December 31, 1997 and 1998 have been
derived from our consolidated financial statements, which have been audited by
Arthur Andersen LLP, independent public accountants, and are included elsewhere
in this prospectus. The selected consolidated financial data set forth below for
the years ended December 31, 1994 and 1995 and as of December 31, 1994, 1995 and
1996 have been derived from our consolidated financial statements, audited by
Arthur Andersen LLP, independent public accountants, which are not included
elsewhere in this prospectus. The selected consolidated financial data set forth
below for the three months ended March 31, 1998 and 1999 and as of March 31,
1999 have been derived from our unaudited consolidated financial statements. In
our opinion, such unaudited data include all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation of the
information set forth therein. The results of operations for the quarter ended
March 31, 1999 are not necessarily indicative of results to be expected for any
future period. The selected consolidated financial data set forth below should
be read in conjunction with the consolidated financial statements and related
notes thereto and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," which are included elsewhere in this
prospectus.

STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- ---------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Net gain on principal transactions......... $ 23,406 $ 26,290 $ 37,113 $ 47,817 $ 95,048 $ 23,307 $ 36,366
Commissions................................ 5,995 7,736 10,180 15,186 26,576 5,299 8,270
Other...................................... 465 3,147 2,643 4,637 4,787 1,172 2,985
--------- --------- --------- ---------- ---------- ----------- ----------
Total revenues........................... 29,866 37,173 49,936 67,640 126,411 29,778 47,621
--------- --------- --------- ---------- ---------- ----------- ----------
EXPENSES:
Employee compensation and benefits......... 4,496 5,167 5,723 8,108 13,921 3,065 4,741
Severance.................................. -- 650 5,375 300 -- -- --
Lease of exchange memberships.............. 2,049 2,113 2,468 3,727 6,568 1,357 2,073
Interest................................... 90 116 331 1,566 3,577 677 1,099
Exchange, clearing and brokerage fees...... 1,336 1,557 1,514 2,042 2,898 656 1,007
Goodwill amortization...................... -- -- -- 737 2,526 416 847
Occupancy.................................. 151 156 435 465 1,121 140 393
Communications............................. 283 367 495 709 964 178 257
Legal and professional fees................ 124 194 170 620 916 172 75
Other...................................... 612 599 642 1,634 2,285 881 603
--------- --------- --------- ---------- ---------- ----------- ----------
Total expenses before managing directors'
compensation, limited partners'
interest in earnings of subsidiary and
unincorporated business taxes.......... 9,141 10,919 17,153 19,908 34,776 7,542 11,095
--------- --------- --------- ---------- ---------- ----------- ----------
Income before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and
unincorporated business taxes............ 20,725 26,254 32,783 47,732 91,635 22,236 36,526
</TABLE>

22
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- ---------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Managing directors' compensation........... 15,128 16,895 23,235 30,008 58,783 14,195 23,100
--------- --------- --------- ---------- ---------- ----------- ----------
Income before limited partners' interest in
earnings of subsidiary and unincorporated
business taxes........................... 5,597 9,359 9,548 17,724 32,852 8,041 13,426
Limited partners' interest in earnings of
subsidiary............................... 2,754 7,046 9,638 14,354 26,292 6,416 10,445
--------- --------- --------- ---------- ---------- ----------- ----------
Income before unincorporated business
taxes.................................... 2,843 2,313 (90) 3,370 6,560 1,625 2,981
Unincorporated business taxes.............. 734 1,179 1,602 1,881 3,900 1,200 1,400
--------- --------- --------- ---------- ---------- ----------- ----------
Net income (loss).......................... $ 2,109 $ 1,134 $ (1,692) $ 1,489 $ 2,660 $ 425 $ 1,581
--------- --------- --------- ---------- ---------- ----------- ----------
--------- --------- --------- ---------- ---------- ----------- ----------
<CAPTION>

DECEMBER 31,
------------------------------------------------------- MARCH 31,
1994 1995 1996 1997 1998 1999
--------- --------- --------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short term investments............ $ 9,481 $ 8,971 $ 16,479 $ 17,989 $ 25,822 $ 43,465
Working capital............................ 32,110 32,855 27,694 62,562 104,250 113,693
Total assets............................... 52,522 65,177 78,918 157,754 272,201 299,338
Total long-term indebtedness............... 7,350 8,750 11,057 43,673 60,323 71,158
Limited partners' interest in subsidiary... 11,773 14,227 12,129 20,724 37,574 35,373
Member's capital........................... 20,123 18,270 13,735 37,658 77,093 85,535
</TABLE>

23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS TOGETHER WITH THE FINANCIAL STATEMENTS AND THE NOTES TO
SUCH STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS
FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT EXPECTATIONS, ASSUMPTIONS,
ESTIMATES AND PROJECTIONS ABOUT US AND OUR INDUSTRY. THESE FORWARD-LOOKING
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, AS MORE FULLY DESCRIBED IN THE "RISK FACTORS" SECTION
AND ELSEWHERE IN THIS PROSPECTUS. WE UNDERTAKE NO OBLIGATION TO UPDATE PUBLICLY
ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES
AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.

OVERVIEW

Founded in 1924, we are one of the oldest and largest specialist firms on
the New York Stock Exchange. Our business has grown considerably during the past
five years. We have accomplished this growth both internally and through
selective acquisitions. Our revenues increased from $29.9 million in 1994 to
$126.4 million in 1998, representing a compound annual growth rate of 43.4%.
During the same period, we increased the number of our common stock listings
from 122 to 284.

REVENUES

Our revenues consist primarily of net gains earned from principal
transactions in securities for which we act as specialist, and commissions
revenue earned from specialist activities. Net gain on principal transactions
represents trading gains net of trading losses and transaction fees, and are
earned by us when we act as principal buying and selling our specialist stocks.
These revenues are primarily affected by changes in share volume and
fluctuations in price in our specialist stocks. Share volume for our specialist
stocks has historically been driven by general trends in NYSE trading volume, as
well as factors particularly affecting our listed companies, including increased
merger and acquisition activity, stock splits, greater frequency of company news
releases (i.e., earnings guidance and reports), heightened research analyst
coverage and investor sentiment. Commissions revenue consists of commissions we
earn when acting as agent to match buyers and sellers for limit orders executed
by us on behalf of brokers after a specified period of time; we do not earn
commissions when we match market orders. Commissions revenue is primarily
affected by share volume of the trades executed by us as agent. Other revenue
consists of proprietary trading revenue and short-term interest income. In 1998,
net gain on principal transactions represented 75.2% of our total revenues,
commissions revenue represented 21.0% of our total revenues, and other revenue
represented 3.8% of our total revenues.

EXPENSES

Our largest operating expense is compensation and benefits. Employee
compensation and benefits primarily consist of salaries and wages and
profitability-based compensation. Profitability-based compensation includes
compensation and benefits paid to managing directors, trading professionals and
other employees based on our profitability and the employee's overall
performance.

Historically, a large portion of the compensation payments to our managing
directors has not been presented as part of operating expenses. The aggregate
amount of these compensation payments has generally approximated LaB Investing's
interest in the income of LaBranche & Co., before managing directors'
compensation. Generally, these payments of compensation have been allocated
among our managing directors based on their respective percentage interests in
the profits of LaB Investing. As a corporation, we will include payments to
managing directors in employee compensation and benefits expense. Therefore,
historical income before managing directors' compensation, limited partners'

24
<PAGE>
interest in earnings of subsidiary and unincorporated business taxes understates
our expected operating costs after this offering.

REORGANIZATION

INCOME TAXES

As a partnership, we have generally not been subject to U.S. federal, state
and local income taxes, apart from the 4% New York City unincorporated business
tax. As part of our restructuring to a corporation, we will be subject to U.S.
federal, state and local income taxes. For information on our pro forma
effective tax rate as a corporation, see the pro forma consolidated information
included elsewhere in this prospectus.

ACQUISITIONS

In the third quarter of 1998, we acquired substantially all the assets of
Fowler, Rosenau & Geary, LLC (or "Fowler, Rosenau"). The acquisition was
accounted for under the purchase method and the excess of cost over estimated
fair value of the net assets acquired, totaling $25.8 million, was allocated to
goodwill. The results of the specialist operations formerly conducted by Fowler,
Rosenau have been included in our consolidated financial statements since July
1, 1998.

In August 1997, we admitted Ernst & Company (or "Ernst") as a limited
partner in connection with our acquisition of the specialist operations of
Ernst. At that time, we also acquired the specialist operations conducted by
individual specialists at the firms of Homans & Co. (or "Homans") and Ware &
Keelips, Inc. (or "Ware & Keelips"). In connection with these transactions, we
also hired as specialists and admitted as members of LaB Investing several
individuals who had previously worked as specialists for Ernst, Homans and Ware
& Keelips. These transactions were accounted for under the purchase method and
the excess of cost over estimated fair value of the net assets acquired,
totaling $17.2 million, was allocated to goodwill. The results of these
specialist operations have been included in our consolidated financial
statements since August 1, 1997.

In July 1997, Thomas Shanley, James Stack and Mark Soltz, formerly
specialists on behalf of Stern Bros., LLC (or "Stern"), were admitted as members
of LaB Investing. In connection with their admission, Messrs. Shanley, Stack and
Soltz contributed capital to LaB Investing which was, in turn, contributed to
LaBranche & Co. This transaction was accounted for under the purchase method and
the excess of cost over estimated fair value of the net assets acquired,
totaling $7.8 million, was allocated to goodwill. The results of these
specialist operations have been included in our consolidated financial
statements since July 1, 1997.

25
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth the statement of operations data for the
periods indicated as a percentage of total revenues:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
Revenues:
Net gain on principal transactions.............................. 74.3% 70.7% 75.2% 78.3% 76.4%
Commissions..................................................... 20.4 22.5 21.0 17.8 17.4
Other........................................................... 5.3 6.8 3.8 3.9 6.2
--------- --------- --------- --------- ---------
Total revenues................................................ 100.0 100.0 100.0 100.0 100.0
--------- --------- --------- --------- ---------
Expenses:
Employee compensation and benefits.............................. 11.5 12.0 11.0 10.3 10.0
Severance....................................................... 10.8 0.4 -- -- --
Lease of exchange memberships................................... 4.9 5.5 5.2 4.6 4.4
Interest........................................................ 0.7 2.3 2.8 2.3 2.3
Exchange, clearing and brokerage fees........................... 3.0 3.0 2.3 2.2 2.1
Goodwill amortization........................................... -- 1.1 2.0 1.4 1.8
Occupancy....................................................... 0.9 0.7 0.9 0.5 0.8
Communications.................................................. 1.0 1.0 0.8 0.5 0.5
Legal and professional fees..................................... 0.3 0.9 0.7 0.6 0.2
Other........................................................... 1.3 2.5 1.8 2.9 1.2
--------- --------- --------- --------- ---------
Total expenses before managing directors' compensation,
limited partners' interest in earnings of subsidiary and
unincorporated business taxes............................... 34.4 29.4 27.5 25.3 23.3
Income before managing directors' compensation, limited
partners' interest in earnings of subsidiary and
unincorporated business taxes................................. 65.6 70.6 72.5 74.7 76.7
Managing directors' compensation.................................... 46.5 44.4 46.5 47.7 48.5
--------- --------- --------- --------- ---------
Income before limited partners' interest in earnings of
subsidiary and unincorporated business taxes.................. 19.1 26.2 26.0 27.0 28.2
Limited partners' interest in earnings of subsidiary................ 19.3 21.2 20.8 21.5 21.9
--------- --------- --------- --------- ---------
Income (loss) before unincorporated business taxes.............. (0.2) 5.0 5.2 5.5 6.3
Unincorporated business taxes....................................... 3.2 2.8 3.1 4.1 3.0
--------- --------- --------- --------- ---------
Net income (loss)............................................... (3.4)% 2.2% 2.1% 1.4% 3.3%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998

REVENUES

Total revenues increased 59.9% to $47.6 million for the three months ended
March 31, 1999, from $29.8 million for the same period in 1998, principally due
to the increase in revenue from net gain on principal transactions. Net gain on
principal transactions increased 56.0% to $36.4 million for the three months
ended March 31, 1999, from $23.3 million for the same period in 1998. This
increase was primarily due to an increase in share volume of our specialist
stocks traded on the NYSE. This increase, in turn, was primarily due to the
Fowler, Rosenau acquisition, under which we became the specialist for 76
additional common stock listings, and was also due to increased share volume as
principal in our existing specialist stocks traded on the NYSE. Our share volume
as principal increased

26
<PAGE>
88.5% to 2.1 billion shares for the three months ended March 31, 1999, from 1.1
billion shares for the same period in 1998.

Commissions revenue increased 56.1% to $8.3 million for the three months
ended March 31, 1999, from $5.3 million for the same period in 1998. This
increase was due to an increase in share volume in which we acted as agent. This
increase, in turn, was primarily due to the increase in the number of our common
stock listings due to the Fowler, Rosenau acquisition, and was also due to
increased share volume in our existing specialist stocks traded on the NYSE. The
share volume executed by us as agent in our specialist stocks increased 62.9% to
917.5 million shares for the three months ended March 31, 1999, from 563.2
million shares for the same period in 1998.

Other revenue increased 154.7% to $3.0 million for the three months ended
March 31, 1999, from $1.2 million for the same period in 1998. This increase was
primarily due to net gains in proprietary trading of non-specialist securities.

EXPENSES

Total expenses before managing directors' compensation, limited partners'
interest in earnings of subsidiary and unincorporated business taxes increased
47.1% to $11.1 million for the period ended March 31, 1999 from $7.5 million for
the same period in 1998.

Employee compensation and related expenses increased 54.7% to $4.7 million
for the three months ended March 31, 1999, from $3.1 million for the same period
in 1998. Our number of employees increased to 156 as of March 31, 1999, from 102
as of March 31, 1998, primarily due to the Fowler, Rosenau acquisition. As a
percentage of total revenues, employee compensation decreased to 10.0% of total
revenues for the three months ended March 31, 1999, from 10.3% of total revenues
for the same period in 1998.

Lease of exchange membership expense increased 52.8% to $2.1 million for the
three months ended March 31, 1999, from $1.4 million for the same period in
1998. This increase was due to the increase in the number of leased memberships
from 31 to 43, primarily resulting from the Fowler, Rosenau acquisition, and was
also due to an increase in the average annual leasing cost of the memberships
from approximately $180,000 to $192,000 per membership. As a percentage of total
revenues, lease of exchange memberships expense decreased to 4.4% for the three
months ended March 31, 1999, from 4.6% for the same period in 1998.

Interest expense increased 62.3% to $1.1 million for the three months ended
March 31, 1999, from $677,000 for the same period in 1998. This increase was
primarily due to an increase in outstanding subordinated indebtedness to $51.2
million at March 31, 1999, from $32.3 million at March 31, 1998.

Exchange, clearing and brokerage fees consist primarily of fees paid by us
as a specialist to the NYSE and clearing fees paid to clearing houses. Fees paid
by us to the NYSE include primarily fees based on the volume of transactions
executed as principal and as agent, as well as a flat annual fee. Exchange,
clearing and brokerage fees expense increased 53.5% to $1.0 million for the
three months ended March 31, 1999, from $656,000 for the same period in 1998.
This increase was primarily attributable to an increase in share volume.

Goodwill amortization increased 103.6% to $847,000 for the three months
ended March 31, 1999, from $416,000 for the same period of the prior year.
Goodwill amortization increased as a result of the Fowler, Rosenau acquisition.

Occupancy expense consists primarily of rent on our premises, including our
executive offices and our space on the NYSE floor, and depreciation on leasehold
improvements. Occupancy expense increased 180.7% to $393,000 for the three
months ended March 31, 1999, from $140,000 for the same period in 1998. This
increase was primarily the result of the expansion of our business.

27
<PAGE>
Communications expense consists primarily of data retrieval and information
services and telephone and data lines. Communications expense increased 44.4% to
$257,000 for the three months ended March 31, 1999, from $178,000 for the same
period in 1998. This increase was the result of additional telephone, data
retrieval and informational services utilized due to the growth of our business.

Legal and professional fees decreased 56.4% to $75,000 for the three months
ended March 31, 1999, from $172,000 for the same period in 1998.

Other expenses decreased 31.6% to $603,000 for the three months ended March
31, 1999, from $881,000 for the same period in 1998. This was the result of
payments made to Fowler, Rosenau in 1998 under a profit sharing arrangement for
trading in a specialist stock. This arrangement was terminated when we acquired
Fowler, Rosenau in July 1998.

Income before managing directors' compensation, limited partners' interest
in earnings of subsidiary and unincorporated business taxes increased 64.3% to
$36.5 million for the three months ended March 31, 1999, from $22.2 million for
the same period in 1998.

Managing directors' compensation increased 62.7% to $23.1 million for the
three months ended March 31, 1999, from $14.2 million for the same period in
1998 as a result of the increased profitability of the firm.

Unincorporated business tax expense increased 16.7% to $1.4 million for the
three months ended March 31, 1999, from $1.2 million for the same period in 1998
as a result of increased profitability of the firm. This increase was generally
attributable to increased income earned by the partnership.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

REVENUES

Total revenues increased 86.9% to $126.4 million for 1998 from $67.6 million
for 1997, principally due to the increase in revenue from net gain on principal
transactions. Net gain on principal transactions increased 98.8% to $95.0
million for 1998, from $47.8 million for 1997. This increase was primarily due
to an increase in share volume. This increase, in turn, was primarily due to
increased share volume as principal in our existing specialist stocks traded on
the NYSE, and was also due to the increase in the number of our common stock
listings due to the Fowler, Rosenau acquisition. Our share volume as principal
increased 134.4% to 5.9 billion shares for 1998, from 2.5 billion shares for
1997.

Commissions revenue increased 75.0% to $26.6 million for 1998 from $15.2
million for 1997. This increase was due to an increase in share volume in which
we acted as agent. This increase, in turn, was primarily due to increased share
volume in our existing specialist stocks traded on the NYSE, and was also due to
the increase in the number of our common stock listings due to the Fowler,
Rosenau acquisition. The share volume executed by us as agent in our special
stocks increased 70.3% to 916.9 million shares for 1998, from 538.5 million
shares for 1997.

Other revenue increased 3.2% to $4.8 million for the twelve months ended
December 31, 1998, from $4.6 million for the same period in 1997. This increase
was primarily due to net gains in proprietary trading of non-specialist
securities.

EXPENSES

Total expenses before managing directors' compensation, limited partners'
interest in earnings of subsidiary and unincorporated business taxes increased
74.7% to $34.8 million for 1998, from $19.9 million for 1997.

28
<PAGE>
Employee compensation and related expenses increased 71.7% to $13.9 million
for 1998, from $8.1 million for 1997. Our number of employees increased to 152
as of December 31, 1998, from 95 as of December 31, 1997, primarily due to the
Fowler, Rosenau acquisition. As a percentage of total revenues, employee
compensation decreased to 11.0% of total revenues for 1998, from 12.0% of total
revenues for 1997.

Severance expense was $0 in 1998 and $300,000 in 1997. We incurred severance
expense during 1997 as a result of a subsequent change in the retirement package
of one of our senior managing directors who retired in 1996.

Lease of exchange membership expense increased 76.2% to $6.6 million for
1998, from $3.7 million for 1997. This increase was due to the increase in the
number of leased memberships from 31 to 43, resulting from the Fowler, Rosenau
acquisition, and due to an increase in the average annual leasing cost of the
memberships from approximately $150,000 to $180,000 per membership. As a
percentage of total revenues, lease of exchange memberships expense decreased to
5.2% for 1998, from 5.5% for 1997.

Interest expense increased 128.4% to $3.6 million for 1998, from $1.6
million for 1997. This increase was primarily due to an increase in outstanding
subordinated indebtedness from $48.1 million at December 31, 1998 from $31.4
million at December 31, 1997.

Exchange, clearing and brokerage fees expense increased 41.9% to $2.9
million for 1998, from $2.0 million for 1997. This increase was primarily
attributable to an increase in share volume.

Goodwill amortization increased 242.7% to $2.5 million for 1998, from
$737,000 for 1997. Goodwill amortization increased due to the Fowler, Rosenau
acquisition. In addition goodwill amortization arising from the Ernst and Stern
acquisitions was incurred for the full year of 1998 and was only incurred during
the second half of 1997.

Occupancy expense increased 141.1% to $1.1 million for 1998, from $465,000
for 1997. This increase was primarily the result of the leasing of additional
office space.

Communications expense increased 36.0% to $964,000 for 1998, from $709,000
for 1997. This increase was the result of additional telephone, data retrieval
and informational services utilized due to the growth of our business.

Legal and professional fees increased 47.7% to $916,000 for 1998, from
$620,000 for 1997. This increase was primarily the result of increased legal and
accounting fees due to the Fowler, Rosenau acquisition and consulting services
we obtained to comply with data processing testing required by the NYSE in
anticipation of the acquisition.

Other expenses increased 39.8% to $2.3 million for 1998, from $1.6 million
for 1997. This was the result of payments made to Fowler, Rosenau in 1998 under
a profit sharing arrangement for trading in a specialist stock. This contractual
arrangement was terminated when we acquired Fowler, Rosenau in July 1998.

Income before managing directors' compensation, limited partners' interest
in earnings of subsidiary and unincorporated business taxes increased 92.0% to
$91.6 million for 1998, from $47.7 for 1997.

Managing directors' compensation increased 95.9% to $58.8 million for 1998,
from $30.0 million for 1997 as a result of the increased profitability of the
firm.

Unincorporated business tax expense increased 107.3% to $3.9 million in
1998, from $1.9 million for 1997 as a result of the increased profitability of
the firm.

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<PAGE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

REVENUES

Total revenues increased 35.5% to $67.6 million for 1997 from $49.9 million
for 1996, principally due to the increase in revenue from principal
transactions, net. Net gain on principal transactions increased 28.8% to $47.8
million for 1997, from $37.1 million for 1996. This increase was primarily due
to an increase in share volume of our specialist stocks traded on the NYSE. This
increase, in turn, was due to our acquisitions of Ernst and Stern, under which
we became the specialist for 52 additional common stock listings, and was also
due to increased share volume as principal in our existing specialist stocks
traded on the NYSE. Our share volume as principal increased 106.3% to 2.5
billion shares for 1997, from 1.2 billion shares for 1996.

Commissions revenue increased 49.2% to $15.2 million for 1997, from $10.2
million for 1996. This increase was primarily due to an increase share volume in
which we acted as an agent. This increase, in turn, resulted from the increase
in number of common stock listings due to the Stern and Ernst acquisitions, and
was also due to increased share volume in our existing specialist stocks traded
on the NYSE. The share volume executed by us as agent in our specialist stocks
increased 60.7% to 538.5 million shares for 1997, from 335.1 million shares for
1996.

Other revenue increased 75.4% to $4.6 million for 1997, from $2.6 million
for 1996. This increase was primarily due to net gains in proprietary trading of
non-specialist securities.

EXPENSES

Total expenses before managing directors' compensation, limited partners'
interest in earnings of subsidiary and unincorporated business taxes increased
16.1% to $19.9 million for 1997, from $17.2 million for 1996.

Employee compensation and related expenses increased 41.7% to $8.1 million
for 1997, from $5.7 million for 1996. Our number of employees increased to 95 on
December 31, 1997 from 64 on December 31, 1996 primarily due to the Ernst and
Stern acquisitions. As a percentage of total revenues, employee compensation
increased to 12.0% of total revenues for 1997, from 11.5% of total revenues for
1996.

Severance expense was $300,000 in 1997 and $5.4 million in 1996 as a result
of the retirement of two of our senior managing directors in 1996.

Lease of exchange membership expense increased 51.0% to $3.7 million for
1997, from $2.5 million for 1996. This increase was due to the increase in the
number of leased memberships from 20 to 31, resulting from the Ernst and Stern
acquisitions, and was also due to the increase in the average annual leasing
cost of the memberships from approximately $132,000 to $150,000 per membership.
As a percentage of total revenues, lease of exchange membership expense
increased to 5.5% for the twelve months ended December 31, 1997, from 4.9% for
the same period in 1996.

Interest expense increased 373.1% to $1.6 million for 1997, from $331,000
for 1996. This increase was primarily due to an increase in outstanding
subordinated indebtedness to $31.4 million at December 31, 1997 from $2.9
million at December 31, 1996.

Exchange, clearing and brokerage fees expense increased 34.9% to $2.0
million for 1997, from $1.5 million for 1996. This increase was primarily
attributable to an increase in share volume.

Goodwill amortization was $737,000 for 1997 and $0 for 1996. Goodwill
amortization for 1997 resulted from the Ernst and Stern acquisitions.

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Occupancy expense increased 6.9% to $465,000 for 1997, from $435,000 for
1996.

Communications expense increased 43.2% to $709,000 for 1997, from $495,000
for 1996.

Legal and professional fees increased 264.7% to $620,000 for 1997, from
$170,000 for 1996. This increase was primarily the result of increased legal
fees incurred in connection with the Stern and Ernst acquisitions.

Other expenses increased 154.5% to $1.6 million for 1997, from $642,000 for
1996. This was the result of payments made to Fowler, Rosenau beginning in the
third quarter of 1997 under a profit sharing arrangement for trading in a
specialist stock. This contractual arrangement was terminated when we acquired
Fowler, Rosenau in July 1998.

Income before managing directors' compensation, limited partners' interest
in earnings of subsidiary and unincorporated taxes increased 45.6% to $47.7
million for 1997, from $32.8 million for 1996.

Managing director compensation increased 29.2% to $30.0 million for 1997,
from $23.2 million for 1996 as a result of the increased profitability of the
firm.

Unincorporated business tax expense increased 17.4% to $1.9 million for
1997, from $1.6 million for 1996 as a result of the increase profitability of
the firm.

LIQUIDITY

We have financed our business primarily through partners' capital and the
issuance of subordinated indebtedness. As of March 31, 1999, we had $299.3
million in assets, $43.4 million of which consisted of cash and short-term
investments, which primarily consist of reverse repurchase agreements payable on
short notice. As of December 31, 1998, we had $272.2 million in assets, $25.8
million of which consisted of cash and short term-investments.

Pro forma net income plus pro forma depreciation and amortization was $14.2
million during the three months ended March 31, 1999, and $38.8 million during
the year ended December 31, 1998. Pro forma depreciation and amortization
expense, which related to fixed assets and goodwill, was $897,000 for the three
months ended March 31, 1999, and $4.0 million for year ended December 31, 1998.

During 1998, we secured a $75.0 million line-of-credit with the Bank of New
York. Amounts outstanding under the Bank of New York credit facility would be
secured by our inventory in our specialist stocks. To date, we have not utilized
this facility. The credit facility matures on June 25, 1999. We are presently
negotiating to extend this credit facility and increase the line of credit to
$100.0 million. In addition, we have outstanding letter of credit agreements
with U.S. Trust Company aggregating approximately $1.6 million, collateralized
by a Treasury bill with a face value of $1.5 million and a cash balance of
approximately $200,000.

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As of March 31, 1999, our subordinated debt totaled $51.2 million. Of this
amount, $35.0 million represented senior subordinated debt placed through
several note purchase agreements. Of this $35.0 million, $20.0 million matures
on September 15, 2002 and bears interest at an annual rate of 8.2%, payable on a
quarterly basis; and $15.0 million matures on June 3, 2008 and bears interest at
an annual rate of 7.7%, payable on a quarterly basis. These notes are senior to
all other subordinated notes. Subordinated debt totaling $16.2 million
represents junior subordinated debt placed with limited partners and their
family members, and employees of the firm. This debt has maturities ranging from
the second half of 1999 through 2000, and bears interest at an annual rate of
10.0%, payable on a quarterly basis. The agreements relating to the junior
subordinated debt generally have automatic rollover provisions which extend the
maturities for an additional year, unless the lender provides notice at least
six months prior to maturity. Of the $16.2 million of junior subordinated debt,
$1.3 million is collateralized by securities. This agreement has an automatic
rollover provision unless at least seven months notice is given by the lender.
Concurrently with this offering, we will repay $5.0 million of the junior
subordinated debt as part of the reorganization of our firm from partnership to
corporate form.

Concurrently with this offering, we will pay $152.4 million to redeem some
limited partnership interests in LaBranche & Co. and some membership interests
in LaB Investing, as part of the reorganization of our firm from partnership to
corporate form. At approximately the same time as this offering, we will incur
long-term indebtedness in an aggregate principal amount of approximately $100.0
million to fund a portion of these payments. In addition, we will issue a
subordinated note in an aggregate principal amount of $16.0 million as partial
payment for the redemption of limited partnership interests. The note will be
repayable as to $6.0 million on the first anniversary of issuance, $5.0 million
on the second anniversary of issuance and $5.0 million on the third anniversary
of issuance, and will bear interest at the annual rate of %. In addition, we
will repay $1.4 million in indebtedness owed in connection with our retirement
plans.

As a broker-dealer, we are subject to regulatory requirements intended to
ensure the general financial soundness and liquidity of broker-dealers and
requiring the maintenance of minimum levels of net capital, as defined in SEC
Rule 15c3-1. We are required to maintain minimum net capital, as defined,
equivalent to the greater of $100,000 or 1/15 of aggregate indebtedness, as
defined. NYSE Rule 326(c) also prohibits a broker-dealer from repaying
subordinated borrowings, paying cash dividends, making loans to any parent,
affiliates or employees, or otherwise entering into transactions which would
result in a reduction of our total net capital to less than 150% of our required
minimum capital. Moreover, broker-dealers, including us, are required to notify
the SEC prior to repaying subordinated borrowings, paying dividends and making
loans to any parent, affiliates or employees, or otherwise entering into
transactions which, if executed, would result in a reduction of 30% or more of
their excess net capital (net capital less minimum requirement). The SEC has the
ability to prohibit or restrict such transactions if the result is detrimental
to the financial integrity of the broker-dealer. At March 31, 1999, we had net
capital of $97.7 million, which was $94.9 million in excess of our required net
capital of $2.8 million.

The NYSE generally requires members registered as specialists to establish
that they can meet, with their own net liquid assets, a minimum dollar amount
which is the greater of $1,000,000 or 25% of their position requirement. As of
December 31, 1998, due to the market share represented by our specialist book,
the NYSE mandated that, notwithstanding the general rule, we maintain minimum
net liquid assets of the greater of $90.0 million or 30% of our position
requirement, adjusted by the amount of the position requirement for any new
stock allocated to us as specialist. The position requirement is the ability to
assume positions in our specialist stocks, of 30,000 shares of each S&P 500
common stock, 22,500 shares in all other common stocks, 4,500 shares in each
convertible preferred stock and 1,800 shares in each nonconvertible preferred
stock for which we act as a specialist. "Net liquid assets" for a specialist who
also engages in transactions other than specialist activities is based upon its
excess net capital as determined in accordance with SEC Rule 15c3-1. As of March
31, 1999,

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our NYSE minimum required dollar amount of net liquid assets was $91.5 million
compared to actual net liquid assets of approximately $109.6 million.

Failure to maintain the required net capital and net liquid assets may
subject us to suspension or revocation of SEC registration or suspension or
expulsion by the NYSE.

We currently anticipate that net proceeds from this offering and the
contemplated indebtedness, together with our available cash resources and credit
facilities will be sufficient to meet our anticipated working capital,
regulatory capital and capital expenditure requirements through the end of 2000.

MARKET RISK

A majority of our specialist related revenues are derived from trading by us
as principal. We also operate a proprietary trading desk separately from our
NYSE specialist operations, which represented 1.8% of our total revenues in
1998. These activities involve primarily the purchase, sale or short sale of
securities for our own account. These activities are subject to a number of
risks, including risks of price fluctuations and rapid changes in the liquidity
of markets. In any period, we may incur trading losses in our specialist stocks
for a variety of reasons, including price declines of our specialist stocks,
lack of trading volume in our specialist stocks and the performance of our
specialist obligations. From time to time, we have large position concentrations
in securities of a single issuer or issuers engaged in a specific industry. In
general, because our inventory of securities is marked to market on a daily
basis, any downward price movement in these securities will result in a
reduction of our revenues and operating profits.

We have developed a risk management process which is intended to balance our
ability to profit from our specialist activities with our exposure to potential
losses. In addition, we have trading limits relating to our proprietary trading
desk. For a full description of our risk management procedures and the limits
placed on our proprietary trading desk, please see "Business--Operations--Risk
Management" and "--Our Proprietary Trading."

YEAR 2000

We have made an assessment of the Year 2000 readiness of our
trading-related, communications and data processing systems. We participated in
the Securities Industry Association "streetwide" testing during the period of
February through April 1999. We believe that our main trading-related and
clearing systems are currently Year 2000 compliant. In addition, the NYSE has
assured us that their information and communications systems are Year 2000
compliant. We require vendors of material hardware and software components of
our information technology systems to provide assurances of their Year 2000
compliance. We have assessed the materiality of our non-information technology

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<PAGE>
systems and have obtained assurances of Year 2000 compliance from providers of
material non-information technology systems.

We cannot be sure that we will not discover Year 2000 compliance problems
that will require substantial revisions. In addition, we cannot be sure that
third-party software, hardware or services incorporated into our computer
systems will not need to be revised or replaced. This could be time-consuming
and expensive. If we fail to fix our trading-related, communications or data
processing systems or to fix or replace third-party software, hardware or
services on a timely basis, our business, financial condition and/or operating
results could be adversely affected. Moreover, our failure to address Year 2000
compliance issues adequately in our main trading-related, communications or data
processing systems could result in litigation which could be a costly and
time-consuming process.

In addition, we cannot assure you that the NYSE, trading counterparties,
governmental agencies, utility companies, third-party service providers,
including clearing houses and others outside our control, particularly other
broker-dealers, will be Year 2000 compliant. The failure by any of these
entities to be Year 2000 compliant could result in a systemic failure beyond our
control, including:

- a loss or reduction in our trading volume;

- limitations on our ability to effectively engage in specialist activities;
or

- prolonged telecommunications or electrical failure.

The occurrence of any systemic failure, including those listed above, could
prevent us from engaging in specialist activities and could have an adverse
effect on our business, financial condition and/or operating results.

The total cost of our Year 2000 project is currently estimated to be
approximately $150,000. Costs related to the project are expensed as incurred,
and we have incurred approximately $125,000 of such costs as of March 31, 1999.

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BUSINESS

OVERVIEW

Founded in 1924, we are one of the oldest and largest specialist firms on
the New York Stock Exchange. As a NYSE specialist, our role is to maintain, as
far as practicable, a fair and orderly market in our specialist stocks. In doing
so, we provide a service to our listed companies, and to the brokers, traders
and their respective customers who trade in our specialist stocks. We believe
that, as a result of our commitment to providing high quality specialist
services, we have developed a strong reputation among our constituencies,
including investors, members of the Wall Street community and our listed
companies.

Our business has grown considerably during the past five years. Our revenues
increased from approximately $29.9 million in 1994 to $126.4 million in 1998,
representing a compound annual growth rate of 43.4%. We have accomplished our
growth both internally and through selective acquisitions. For example, since
the NYSE implemented its new specialist allocation process in March 1997, we
were selected by 40 new listed companies, resulting from 62 listing interviews.
In addition we have acquired three specialist operations since 1997, adding 128
new common stock listings to our firm. During the past five years, we have also
increased the scope of our business, as illustrated by the following data
obtained from the NYSE:

- the annual dollar volume on the NYSE of stocks for which we acted as
specialist increased to $950.4 billion in 1998, as compared to $112.3
billion in 1994. Based on these dollar volumes, we were the largest
specialist firm in 1998 as compared to the sixth largest in 1994;

- the annual share volume on the NYSE of stocks for which we act as
specialist increased to 20.0 billion in 1998, as compared to 3.4 billion
in 1994. Based on these share volumes, we were the second largest
specialist firm in 1998 as compared to the fourth largest in 1994; and

- the total number of our common stock listings increased to 284 as of June
1, 1999, as compared to 122 as of December 31, 1994. Based on the number
of our common stock listings, we were the third largest specialist firm as
of both of these dates. In addition, we act as specialist for 78 other
listed securities.

Our listed companies include:

- 47 of the S&P 500 companies; and

- five of the 30 companies comprising the Dow Jones Industrial Average. Our
five Dow stocks are AT&T, Chevron, Exxon, Merck and Minnesota Mining &
Manufacturing.

INDUSTRY BACKGROUND

THE NYSE

The NYSE is currently the largest securities market in the world. The market
capitalization of all U.S. shares listed on the NYSE increased from
approximately $4.4 trillion at December 31, 1994 to approximately $10.9 trillion
at December 31, 1998, representing a compound annual growth rate of 25.0%. The
number of companies listed on the NYSE increased from 2,570 at the end of 1994
to 3,114 at the end of 1998.

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The NYSE's average daily trading volume increased from 91.2 million shares
in 1984 to 673.6 million shares in 1998, as illustrated by the following graph:

NYSE AVERAGE DAILY TRADING VOLUME FROM 1984 TO 1998
(SHARE VOLUME IN MILLIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
NYSE AVERAGE DAILY TRADING VOLUME FROM 1984 TO 1998
<S> <C> <C>
1984 91.2
1985 109.2
1986 141.0
1987 188.9
1988 161.5
1989 165.5
1990 156.8
1991 178.9
1992 202.3
1993 264.5
1994 291.4
1995 346.1
1996 412.0
1997 526.9
1998 673.6
</TABLE>

Trading on the NYSE takes place through open bids to buy and open offers to
sell made by NYSE members, acting as principal or as agent for institutions or
individual investors. Buy and sell orders meet directly on the trading floor
through an auction process, and prices are determined by the interplay of supply
and demand in that auction. In order to buy and sell securities on the NYSE, a
person must first be accepted for membership in the NYSE. The number of
memberships, or seats, is presently limited to 1,366, and the price of a
membership depends on supply and demand. Based on recent transfers of
memberships, the market price of a membership on the NYSE is over $2.0 million.
To become a member, each prospective applicant must also pass an examination
covering NYSE rules and regulations.

NYSE members are generally categorized based upon the activities in which
they engage on the trading floor, such as specialists or brokers. The largest
single membership group is floor brokers, which consists of both commission
brokers and independent brokers. Commission brokers are employed by
broker-dealer firms that are members of the NYSE and earn salaries and
commission. Independent floor brokers are brokers who independently handle
orders for other broker-dealers and financial institutions.

THE SPECIALIST

All trading of securities on the NYSE is conducted through an auction
process. The auction process for each security is managed by the specialist for
that security. The specialist is a broker-dealer who applies for and, if
accepted, is assigned the role to maintain a fair and orderly market in its
specialist stocks. The number of specialist units on the NYSE, many of which are
organized as private partnerships, has decreased from 39 at December 31, 1994 to
31 at June 1, 1999. Of these, the three largest specialist units as ranked by
their number of specialist stocks were responsible for approximately 41.0% of
the average daily trading volume (measured by dollar volume) in 1998.

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A specialist firm is granted the franchise by the NYSE in a particular stock
to conduct the auction in that security. Specialist firms conduct their auctions
at specific trading posts located on the floor of the NYSE. Because the
specialist firm runs the auction in its specialist stocks, it knows of all bids
and offers in those stocks and gathers orders to price its stocks appropriately.

Specialist firms compete for the original listing of stocks through an
allocation process organized by the NYSE. As part of this allocation process,
companies seeking a listing may select a specialist firm in one of two ways.
Under the first method, the NYSE's allocation committee selects the specialist
firm based on specific criteria. Under the second method, available since March
1997, the listing company requests that the allocation committee select three to
five potential specialist firms suitable for the stock, based on criteria
specified by the listing company. The listing company then has the opportunity
to meet with each specialist firm identified by the allocation committee. Within
one week after meeting the competing specialist firms, the listing company must
select a specialist firm. Currently, substantially all of the companies seeking
a listing on the NYSE are opting to make the final choice of their own
specialist firm under the second allocation method.

When assigned a particular stock, the specialist firm agrees to specific
obligations. The specialist firm's role is to maintain, as far as practicable,
trading in the stock that will be fair and orderly. This implies that the
trading will have reasonable depth and price continuity, so that, under normal
circumstances, a customer may buy or sell stock in a manner consistent with
market conditions. A specialist firm helps market participants achieve price
improvement in their trades because the best bids and offers are discovered
through the auction process. In performing its obligations, the specialist firm
is exposed to all transactions that occur in each of its specialist stocks on
the NYSE floor. In any given transaction, the specialist firm may act as:

- an auctioneer by setting opening prices for its specialist stocks and by
matching the highest bids with the lowest offers, permitting buyers and
sellers to trade directly;

- a facilitator bringing together buyers and sellers who do not know of each
other in order to execute a trade which would not otherwise occur;

- an agent for broker-dealers who wish to execute transactions as instructed
by their customers. Typically, these orders are limit orders entrusted to
the specialist at prices above or below the current market price; or

- a principal using its own capital to buy or sell stocks for its own
account.

The specialist firm's decision to buy or sell shares of its specialist
stocks as principal for its own account may be based on obligation or
inclination. For example, the specialist firm may be obligated to buy or sell
its specialist stock to counter short-term imbalances in the prevailing market,
thus helping to maintain a fair and orderly market in that stock. At other
times, the specialist firm may be inclined to buy or sell the stock as principal
based on attractive opportunities. The specialist firm may trade at its election
so long as the trade will contribute to a fair and orderly market. In
actively-traded stocks, the specialist firm continually buys and sells its
specialist stocks at varying prices throughout each trading day. The specialist
firm's goal and expectation is to profit from differences between the prices at
which it buys and sells these stocks. In fulfilling its specialist obligations,
however, the specialist firm may, at times, be obligated to trade against the
market, adversely impacting the profitability of the trade. In addition, the
specialist firm's trading practices are subject to a number of restrictions, as
described in "--Operations--NYSE Rules Governing Our Specialist Activities."

RECENT TRENDS IN NYSE TRADING AND THE SPECIALIST'S ROLE

Specialist firms generate revenues by executing trades, either as agent or
principal, in their specialist stocks. Accordingly, the specialist firms'
revenues are primarily driven by the volume of

37
<PAGE>
trading on the NYSE. This volume has increased significantly in recent years.
The increase in trading volume has resulted from a number of factors, including:

- an increase in the number of households investing in stocks;

- an increase in the amount of assets managed through retirement plans,
mutual funds, annuity and insurance products, index funds and other
institutional investment vehicles;

- the increased popularity and use of computerized trading, hedging and
other derivative strategies;

- an increase in NYSE-listed stocks due to:

- IPOs and spin-offs;

- transfers from Nasdaq and the American Stock Exchange; and

- an increase in listings of foreign companies;

- higher equity portfolio turnover by individuals and institutional
investors as a result of lower commission rates and other transaction
costs;

- an increase in on-line trading;

- trading in smaller price increments;

- an increase in the market capitalization of growth stocks; and

- an increase in the amount of shares traded due to stock splits and stock
dividends.

In addition, the NYSE is considering the following changes:

- longer trading days;

- trading in decimals; and

- trading of foreign stocks in ordinary form side by side with their
American depository receipts (ADRs).

These changes are being considered for implementation within the next 18 months.
We believe that, if instituted, these changes will likely contribute to
additional growth in NYSE trading volume.

The majority of trades in NYSE-listed stocks take place through NYSE
specialist firms. In 1998, specialist firms handled approximately 84.2% of
trades in NYSE-listed stocks. Trades in NYSE-listed stocks are also generally
effected as follows:

- some stocks are listed on multiple exchanges, such as regional exchanges,
and trades take place on those exchanges;

- NYSE members may trade NYSE stocks that were listed after April 26, 1979
off the NYSE in the over-the-counter market. Approximately 70.0% of the
NYSE-listed stocks may be traded by NYSE members over-the-counter; and

- non-NYSE members may trade NYSE-listed stocks off of the NYSE in
over-the-counter markets.

Technological advances have contributed to the increased trading through
alternative trading systems (ATSs), such as electronic communications networks
(ECNs) and crossing systems. While the first ECN was created in 1969, most of
the others currently in operation were started in the past few years. These
systems electronically facilitate the matching of buy and sell orders that are
entered by their network members. If a match does not occur, some ATSs will
forward unfilled orders to other ATSs or to exchanges such as the NYSE. Some of
these networks also allow limited negotiation between members to facilitate a
match. These ATSs generally limit trades over their systems to their

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<PAGE>
members, who are typically large financial institutions, well-capitalized
traders or brokerage firms. Additionally, some ATSs are being developed to
facilitate trading by retail investors. In April 1999, the SEC ruled that these
networks are allowed, and in specified cases are required, to register and
become subject to regulation as stock exchanges. To date, only one of these
networks has applied to register as a stock exchange.

The percentage of annual trading of listed stocks on the NYSE has ranged
from 82.1% to 84.2% for the past five years. It is unclear, however, how the
alternative trading methods and new technologies just described or that may be
developed will affect the percentage of trading in listed stocks conducted on
the NYSE. The NYSE has indicated that it is studying the possibility of
embracing electronic communications network technology to expand trading. ATSs
may be developed, organized and operated by large brokerage houses and
investment banks with greater capital, better access to technology and direct
access to investors. As a result, these parties may be well positioned to direct
trading to these networks. These alternative trading methods may account for a
growing percentage of the trading volume of NYSE listed stocks.

The accelerating growth of trading volume and the increase in stock prices
on the NYSE in the 1990s has increased the demands upon specialists. In order to
fulfill their obligations, specialists are required to execute a greater number
of trades in a shorter period of time with greater price volatility. In
addition, specialists are called upon to take larger positions in their
specialist stocks. These factors have led to a consolidation of specialist units
in the past five years. The number of specialist units on the NYSE decreased
from 39 at December 31, 1994 to 31 at June 1, 1999. We believe that the
specialist market is becoming increasingly dominated by a number of large,
better-capitalized specialist firms which are able to provide an enhanced level
of service.

LABRANCHE'S COMPETITIVE POSITION

We are committed to providing the highest quality service to our various
constituencies. We believe our success is based on the following factors:

- LEADING POSITION IN THE SPECIALIST MARKET. We have a long-standing
reputation as one of the leading specialist firms on the NYSE. Founded in
1924, we have successfully grown our business and improved our services
through widely varying market conditions. As of December 31, 1998:

- trading in the stocks for which we acted as specialist during 1998
accounted for 14.2% of the dollar volume on the NYSE. Based on this
percentage, we were the largest specialist firm on the NYSE; and

- trading in the stocks for which we acted as specialist during 1998
accounted for 12.7% of the share volume on the NYSE. Based on this
percentage, we were the second largest specialist firm on the NYSE.

- DIVERSE AND HIGH QUALITY SPECIALIST STOCKS. Our listed companies operate
in a variety of industries including financial services, media, oil and
gas, retail, technology and telecommunications. Many of our listed
companies are leaders in their respective fields. We believe that acting
as specialist in the stocks of industry leaders will benefit us as these
leading companies continue to expand their businesses through internal
growth and acquisitions.

- STRONG MARKET-MAKING SKILLS. We utilize our strong market-making skills to
actively trade as principal in our specialist stocks. We believe that we
significantly improve liquidity in our specialist stocks, particularly
during periods of market volatility. In 1998, approximately 30.4% of our
trades were as principal as compared to an average of approximately 25.3%
for all NYSE specialists.

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<PAGE>
- INNOVATIVE CUSTOMER-ORIENTED SERVICES. We are committed to providing our
listed companies a high level of service, in addition to our specialist
functions on the trading floor. We provide our listed companies with
detailed reports on the trading activity of their stocks. We also maintain
frequent contact with a majority of our listed companies to discuss the
trading in their stock. In addition, we were the first specialist firm to:

- host an annual listed company conference;

- publish a company newsletter; and

- commission customer satisfaction surveys from our listed companies.

- RECENT ACQUISITIONS. Since 1997, we have acquired the following three
specialist operations, solidifying our position as one of the leading NYSE
specialist firms:

- Fowler, Rosenau & Geary, LLC (July 1998);

- Ernst, Homans, Ware & Keelips (August 1997); and

- a portion of the specialist operations of Stern Bros., LLC (July 1997).

We have effectively employed our capital resources and skilled personnel to
maximize the synergies created through consolidation. In doing so, we have
succeeded in growing each of these acquired operations and enhancing their
profitability.

LABRANCHE GROWTH STRATEGY

Our objective is to continue the growth in our revenues and profits by
pursuing the following strategies:

- AGGRESSIVELY PURSUE NEW LISTINGS. We have been and will continue to be
aggressive in positioning ourselves in the NYSE allocation process.
Between March 1997, when the NYSE adopted the new allocation procedure,
and June 1, 1999, we participated in 62 selection pools for listed
companies and were chosen by management of the listed companies in 40 of
them. Recently, we were selected as specialist by Pepsi Bottling Group and
Fox Entertainment, as these companies completed two of the six largest
initial public offerings in the United States measured in dollars. In
addition, Viacom chose us as specialist in 1999 when it transferred its
listing to the NYSE, the largest transfer to the NYSE measured by market
capitalization.

- ACTIVELY PARTICIPATE IN THE CONSOLIDATION OF THE SPECIALIST INDUSTRY
THROUGH SELECTIVE ACQUISITIONS. We intend to take advantage of the
consolidation trend in the specialist industry by selectively pursuing
acquisitions of other specialist operations. Largely due to our three
recent acquisitions, we have more than doubled the number of our common
stock listings from 122 at December 31, 1994 to 284 at June 1, 1999. We
gained valuable experience through these transactions by effectively
integrating the operations of other specialist firms with those of our
own. We believe this experience will help us to:

- identify and attract acquisition candidates; and

- successfully integrate operations we may acquire.

In addition, we believe that the ability to offer our publicly traded
common stock as part of the purchase price for acquisitions will further
help us in attracting acquisition candidates.

- INCREASE OUR CAPITAL BASE AND EXPAND ACCESS TO CAPITAL. This offering
provides us with a more permanent capital base. We intend to proceed to
strengthen our capital base to meet the increasing demands imposed by the
current marketplace. For example, after the offering our working capital
will increase from $113.7 million to $226.3 million. In selecting a
specialist firm, listed companies often focus on the capital resources of
the specialist, especially more recently as trading volumes have
increased. We believe that a more permanent and stronger capital base

40
<PAGE>
will help us to continue our active capital utilization, thereby enhancing
our reputation as an active specialist and helping us attract more new
listings.

RECENT ACQUISITIONS

In July 1998, we acquired substantially all the assets of Fowler, Rosenau &
Geary, LLC, including its right to act as a specialist on the NYSE. In
connection with the acquisition, the inactive members of Fowler, Rosenau were
admitted to LaBranche & Co. as limited partners and the active members of
Fowler, Rosenau became members of LaB Investing. The former members of Fowler,
Rosenau acquired an aggregate interest in LaBranche's future profits equal to
22.4% at that time. In connection with this acquisition and with the approval of
the NYSE, we became the specialist firm for an additional 76 common stock
listings, including Chevron, Merck, Minnesota Mining & Minerals and
Schlumberger.

In August 1997, we admitted Ernst & Company as a limited partner in
connection with our acquisition of the specialist operations of Ernst. At that
time, we also acquired the specialist operations conducted by individual
specialists at the firms of Homans & Co. and Ware & Keelips, Inc. In connection
with these transactions, we also hired as specialists, and admitted as members
of LaB Investing, several individuals who had been employed as specialists by
Ernst, Homans and Ware & Keelips. At the time of its admission as a limited
partner, Ernst acquired an interest in LaBranche & Co.'s future profits equal to
7.2% at that time. In connection with our acquisition of these specialist
operations and with the approval of the NYSE, we became the specialist firm for
an additional 33 common stock listings, including Exxon and Compaq.

In July 1997, Thomas Shanley, James Stack and Mark Soltz, formerly
specialists on behalf of Stern Bros., LLC, were admitted as new members of LaB
Investing. In connection with their admission as members, Messrs. Shanley, Stack
and Soltz contributed capital to LaB Investing which was, in turn, contributed
to LaBranche & Co. In connection with this acquisition and with the approval of
the NYSE, we became the specialist firm for an additional 19 common stock
listings.

OPERATIONS

NYSE RULES GOVERNING OUR SPECIALIST ACTIVITIES

Under the NYSE rules, a specialist has a duty to maintain, as far as
practicable, a fair and orderly market in its specialist stocks. In order to
fulfill its obligations, the specialist must at times trade for its own account,
even when it may adversely affect the specialist's profitability. In addition,
under some circumstances, the specialist is prohibited from making trades as
principal in its specialist stocks. The specialist's obligations are briefly
described below.

REQUIREMENT TO TRADE AS PRINCIPAL. A specialist must buy and sell securities
as principal when necessary to minimize an actual or reasonably anticipated
short-term imbalance between supply and demand in the auction market. The
specialist must effect these transactions when their absence could result in an
unreasonable lack of continuity and/or depth in their specialist stocks. The
specialist is not expected to act as a barrier in a rising market or a support
in a falling market, but must use its own judgment to try to keep such price
increases and declines equitable and consistent with market conditions.

A specialist must make firm and continuous two-sided quotations that are
timely and that accurately reflect market conditions. In making these
quotations, the specialist's transactions are calculated to contribute to the
maintenance of price continuity with reasonable depth. Following is an
illustration of how a specialist acts as principal to maintain price continuity:

The most recent sale in a listed stock was $50, the best public bid (to
buy) on the specialist's book is $49 3/4, and the best public offer (to
sell) on the book is $50 1/4. A broker who wants to buy

41
<PAGE>
100 shares at the market in this instance without a specialist would
purchase at $50 1/4, the offer price. Similarly, a broker seeking to sell
100 shares without a specialist would receive $49 3/4, the bid price. The
specialist, who is expected to provide reasonable price continuity, in this
case might narrow the quote spread by offering or bidding for stock for its
own account. In this instance, the broker who wants to buy 100 shares might
buy at $50 1/16 from the specialist, as opposed to buying the same amount of
shares from the best offer of $50 1/4, thereby offering price improvement to
the customer. In the next trade, a broker willing to sell 100 shares might
sell to the specialist at $50, as opposed to selling to the best available
bid of $49 3/4, again achieving price improvement for the customer.

TRADING RESTRICTIONS. In trading for its own account, the specialist must
avoid initiating a market-destabilizing transaction. All purchases and sales
must be reasonably necessary to permit the specialist to maintain, as far as
practicable, a fair and orderly market in its specialist stocks. In addition,
the specialist must comply with the following trading requirements:

- A specialist must first satisfy a customer's market buy order (an order to
buy at the prevailing market price) before buying any stock for its own
account. Similarly, a specialist must first satisfy a customer's market
sell order (an order to sell at the prevailing market price) before
selling any stock for its own account.

- A specialist must first satisfy a customer's limit order held by it before
buying or selling at the same price for its own account. A limit order is
an order either to buy only at or below a specified price, or to sell only
at or above a specified price. A specialist may not have priority over any
customer's limit order. A specialist, however, may buy or sell at the same
price as a customer limit order as long as that limit order is executed
first.

- If a public buyer wants to buy at a particular price and a seller wants to
sell at the same price, the buyer and seller trade directly with each
other, and the specialist should not interfere in the transaction.

- The specialist does not charge commissions for trades in which it acts as
a principal.

- Except in some circumstances in less active markets, the specialist may
not, without permission from an NYSE official, initiate destabilizing
trades for its own account which cause the stock price to rise or fall.

- Any transactions by the specialist for its own account must be effected in
a reasonable and orderly manner in relation to the condition of the
general market, the market in the particular stock and the adequacy of the
specialist's position to the immediate and reasonably anticipated needs of
the market.

In addition, the specialist cannot be in a control relationship with any of
its listed companies. This means a specialist may not acquire more than 5% of
any common or preferred issue of its specialist stocks and may not own 10% or
more of any common or preferred stock. A specialist should not hold any position
as an officer or director or receive payments or loans or engage in business
transactions with any of its listed companies.

RISK MANAGEMENT

Because our specialist activities expose our capital to significant risks,
managing these risks is a constant priority for us. Our central role in the
auction process helps us to reduce risks by enabling us to incorporate
up-to-date market information in the management of our inventory, subject to our
specialist obligations. In addition, we have developed a risk management process
which is designed to balance our ability to profit from our specialist
activities with our exposure to potential losses. Our risk

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<PAGE>
management process includes as participants our executive committee, our floor
management committee, our floor team captains and our specialists. These
parties' roles are described as follows:

EXECUTIVE COMMITTEE. Our executive committee is composed of Michael
LaBranche, Vincent J. Flaherty, Alfred O. Hayward, Jr., Michael J. Naughton,
James G. Gallagher and John O. Pickett. This committee is responsible for
approving all risk management policies and trading guidelines for particular
specialist stocks, after receiving input and proposals by the floor management
committee. In addition, our executive committee reviews all unusual situations
reported to it by our floor management committee.

FLOOR MANAGEMENT COMMITTEE. Our floor management committee is composed of
Messrs. Flaherty, Hayward, Naughton, Gallagher and Pickett. This committee is
responsible for formulating and overseeing our overall risk management policies
and risk guidelines for each of our specialist stocks. In arriving at these
policies and guidelines, our floor management committee considers the advice and
input of our floor team captains. Our floor management committee meets with all
floor team captains no less than once a month to review and, if necessary,
revise the risk management policies for our company as a whole and/or for
particular specialist stocks. In addition, a member of our floor management
committee is always available on the trading floor to review and assist with any
unusual situations reported by a captain. Our floor management committee reports
to our executive committee about each of these situations.

FLOOR TEAM CAPTAINS. We have seven floor team captains who monitor the
activities of our specialists throughout the trading day from various positions
at our trading posts. The captains observe trades and constantly review trading
positions in real-time through our information systems. In addition, the
captains are readily available to assist our specialists in determining when to
deviate from our policies and guidelines to react to any unusual situations or
market conditions. The captains must report these unusual situations to
management, including any deviations from our policies and guidelines. Captains
meet with each specialist at least once a week to evaluate the specialist's
adherence to our risk management policies and guidelines. Captains also meet
among themselves at least twice weekly to review risk policies and guidelines
and, if appropriate, make new recommendations to the floor management committee.

SPECIALISTS. Our specialists conduct auctions based upon the conditions of
the marketplace. In doing so, specialists should observe our risk management
policies and guidelines as much as practicable. Specialists must immediately
notify a captain of any unusual situations or market conditions requiring a
deviation from our policies and guidelines.

We rely heavily on our information systems in conducting our risk
management. Management members and captains must constantly monitor our
positions and transactions in order to mitigate our risks and identify
troublesome trends as they occur. We have invested substantial capital in
real-time, on-line systems which give management instant access to specific
trading information at any time during the trading day, including:

- our aggregate long and short positions;

- the various positions of any one of our trading professionals;

- our overall position in a particular stock;

- capital and profit-and-loss information on an aggregate, per specialist or
per issue basis; and

- average position size.

CIRCUIT BREAKER RULES. The NYSE has instituted certain circuit breaker
rules intended to halt trading in all NYSE listed stocks in the event of a
severe market decline. The circuit breaker rules impose temporary halts in
trading when the Dow Jones Industrial Average drops a certain number of

43
<PAGE>
points. Circuit breaker levels are set quarterly at 10, 20 and 30 percent of the
Dow Jones Industrial Average closing values of the previous month, rounded to
the nearest 50 points.

LISTED COMPANY SERVICES

We are committed to providing our listed companies with a high level of
service, in addition to our specialist functions on the trading floor. We have a
Corporate Relations Department, consisting of five full-time employees and one
independent consultant devoted to serving our listed companies. The most
important function of the Corporate Relations Department is to provide current
information to the listed companies. Upon request, our Corporate Relations
Department provides our listed companies with the following reports:

- daily reports on the trading results of their stock;

- real-time data regarding intra-day trading activity in their stock; and

- weekly, monthly and yearly reports which analyze short and long term
trading trends in their stock.

In addition to providing trading information, we help to educate our listed
companies on general market trends. We organize annual educational conferences
that review trends in the securities industry and NYSE trading. We also publish
for and distribute to our listed companies a periodic newsletter that reviews
market trends. Finally, we survey our specialist companies annually on the
quality of our services, and use the information obtained in these surveys to
continually improve our services.

NYSE MEMBERSHIPS

NYSE memberships are granted only to individuals, and each individual
specialist must own or lease an NYSE membership. We have 48 specialists, each of
whom owns or leases a membership under the following arrangements:

- 10 memberships are owned directly by 10 of our specialists;

- four are owned by specialists and were financed by us, or by Fowler,
Rosenau prior to the Fowler, Rosenau acquisition; and

- 34 are leased by 34 of our specialists from other individual members, and
we pay and guarantee the lease payments.

OUR INFORMATION AND COMMUNICATIONS SYSTEMS AND THE NYSE'S SUPER-DOT SYSTEM

As a self-clearing broker-dealer, we have made significant investments in
our trade processing systems. Our use of and dependence on technology have
allowed us to maintain our significant growth over the past several years. In
addition to using consultants who primarily service the specialist industry, we
have an in-house information technology staff. We currently clear an average of
33,000 principal trades per day. We do not clear trades for third parties. Our
information systems send and receive data from the NYSE through a dedicated data
feed.

Our systems enable us to monitor, on a real-time basis, our profits and
losses along with our trading positions. The NYSE supplies us with specialist
position reporting system terminals both on the trading floor and in our
offices. These terminals allow us to monitor our trading profits and losses as
well as our positions. We have also developed software that allows us to monitor
these items in the event that the NYSE-provided systems fail.

We have established a back-up disaster recovery center in Hoboken, NJ in the
event of a local disaster. The back-up system operates as a mirror image of our
primary computer system in New York

44
<PAGE>
City as we have a direct connection between the two sites which we utilize to
back-up all data on an hourly basis. On a regular basis, we test both systems to
assure that they are fully operational.

In executing trades on the NYSE, we receive electronic orders from the
Super-DOT system, an order routing system operated by the NYSE. The Super-DOT
System is designed to handle individual orders of up to 100,000 shares and is
essentially an electronic broker. Orders that originate through the Super-DOT
system are routed directly to us through our computer system at the NYSE. When
we receive an order from the Super-DOT system, we conduct the same auction
process and we are subject to the same obligations as with any other order.

Our information technology staff has developed software which enables our
corporate relations staff and our specialists to share information with each
other regarding upcoming company and industry conferences. In addition, we
monitor each of our specialist stocks intra-day to see if there are any
significant price and/or volume variances of which we should alert the listed
company. This has proven to be a valuable customer service tool.

OUR PROPRIETARY TRADING

In 1995, we initiated a proprietary trading program, seeking to leverage our
trading and market experience. Our strategy is short-term oriented, and most of
our positions are intra-day and not held overnight. Four of our traders focus
primarily on stocks listed on the NYSE. A fifth trader focuses entirely on
listed futures and options on both United States Treasury obligations and
Eurodollars. In 1998, we derived less than 2.0% of our revenues from our
proprietary trading and we have averaged less than 3.0% over the past three
years. Our proprietary trading desk utilizes a Windows NT based trade reporting
system which captures all trades executed by the trading desk and marks all
positions to market. We are not permitted to trade in stocks for which we act as
specialist.

We have taken the following actions to manage the risks associated with our
proprietary trading:

- for 1999, we have limited our capital commitment for our proprietary
trading to an aggregate maximum of $22.0 million per day and overnight
positions of up to $13.5 million per day;

- each of our proprietary traders have specific trading limits, which may
not be exceeded without the approval of executive management. Our most
experienced trader may invest up to $12.0 million per day and may hold
overnight positions up to $7.5 million. Each of our other traders have
daily investment limits of $5 million or less and overnight investment
limits of $3.0 million or less, depending on their experience;

- the positions of our futures and options traders are monitored by an
in-house model that measures potential intra-day risk as well as actual
dollar exposure; and

- one of our managing directors who is not involved in our proprietary
trading program serves as the risk manager for that program. He oversees
all of our proprietary trading and has the authority to instruct the
proprietary trading desk to liquidate positions or otherwise reduce risk.
He reports directly to Michael LaBranche, our chief executive officer.

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<PAGE>
SPECIALIST COMPANIES

As of June 1, 1999, we acted as specialist for 284 common stocks listed on
the NYSE. Our listed companies operate in a variety of industries including
financial services, media, oil and gas, retail, technology and
telecommunications. They ranged in market capitalization from some of the
smallest on the NYSE to some of its largest and well-known corporations. We also
represent 45 foreign listings on the NYSE. The following is a list of our top 50
listed companies in terms of market capitalization as of June 1, 1999 in order
of their respective global market capitalization:

<TABLE>
<C> <S>
Exxon
AT&T
Merck
Lucent Technologies
Glaxo Wellcome
SBC Communications
SmithKline Beecham
Tyco International
Chevron
ING Groep
MediaOne Group
Medtronic
Compaq
The Gap
Minnesota Mining & Manufacturing
TOTAL S.A.
Schlumberger
ABN Amro Holding
Taiwan Semiconductor Manufacturing
Koninklijke Philips Electronics
Atlantic Richfield
U.S. West
Viacom
National Australia Bank
Kroger
Royal PTT Nederland
SunTrust Banks
Household International
Lowes
Firstar
Istituto Bancario San Paolo di Torino Istituto Mobiliare Italiano
CVS
Equant
News Corporation
Fox Entertainment Group
Bestfoods
Petrofina S.A.*
TNT Post Group
Australia & New Zealand Banking Group
PPG Industries
Computer Sciences Corporation
Conseco
Bank of Ireland Group
Tribune Company
Comerica
Public Service Enterprise Group
Archer-Daniels Midland
Entergy
UNUM
Circuit City Stores
</TABLE>

- ------------------------

* This stock was delisted June 10, 1999 as a result of its merger with TOTAL
S.A.

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<PAGE>
For a complete listing of our listed companies, please see the inside back
cover of this prospectus.

MARKETING

It is a priority for our management to proactively identify potential
listing companies before the allocation process begins. We contact these
companies and commence our marketing efforts upon determining that they are
considering listing on the NYSE. Our marketing efforts typically consist of
members of our management group visiting with the companies that are considering
listing on the NYSE and describing our services. We also provide written
literature describing our operations, our listed companies, our 75-year history
as a specialist firm and our industry in general.

REGULATORY MATTERS

GENERAL

The securities industry in the United States, including all broker-dealers,
is subject to extensive regulation under both federal and state laws. In
addition, the SEC and the NYSE require strict compliance with their rules and
regulations. As a matter of public policy, regulatory bodies are charged with
safeguarding the integrity of the securities and other financial markets and
with protecting the interests of investors participating in those markets.

As a broker-dealer, we are subject to regulations concerning operational and
financial aspects of our business. We are subject to extensive registration
requirements with various government entities and self regulatory organizations,
commonly referred to as SROs, with which we must comply before we can conduct
our business. We are also subject to laws, rules and regulations forcing us to
comply with financial reporting requirements, trade practices, capital structure
requirements, and record retention requirements governing the conduct of our
directors, officers and employees. Failure to comply with any of these laws,
rules or regulations could result in censure, fine, the issuance of
cease-and-desist orders or the suspension or disqualification of our directors,
officers or employees, and other adverse consequences, which could have an
adverse effect on our business.

As a NYSE specialist firm, we are under constant review by the NYSE on all
aspects of our operations and financial condition. As part of the price
discovery mechanism implemented by the NYSE, every specialist transaction is
published immediately on the tape and is broadcast worldwide. The NYSE also
employs sophisticated monitoring and stringent rules approved by the SEC. The
NYSE's Market Surveillance Division examines specialists' trading in all stocks,
every trading day, including specialists' decisions to trade or to not trade as
principal.

NET CAPITAL REQUIREMENTS

As a broker-dealer, we are subject to SEC Rule 15c3-1, which requires
minimum net regulatory capital. We are required to maintain minimum net capital,
as defined, equivalent to the greater of $100,000 or 1/15 of our aggregate
indebtedness, as defined. At March 31, 1999, our net capital, as defined by the
SEC, was approximately $97.7 million and exceeded minimum requirements by
approximately $94.9 million.

The NYSE also requires members registered as specialists to establish that
they can meet, with their own net liquid assets, a minimum dollar amount which
is the greater of $1,000,000 or 25% of their position requirement. As of
December 31, 1998, due to the market share represented by our specialist book,
the NYSE mandated that, notwithstanding the general rule, we maintain minimum
net liquid assets of the greater of $90.0 million, adjusted by the amount of the
position requirement for any new stock allocated to us as specialist or 30% of
our position requirement. Our position requirement is the ability to assume
positions in stock in which we are registered, of 30,000 shares of each S&P 500
common stock, 22,500 shares in all other common stocks, 4,500 shares in each
convertible preferred

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<PAGE>
stock and 1,800 shares in each nonconvertible preferred stock in which we are a
specialist. "Net liquid assets" for a specialist firm that also engages in
transactions other than specialist activities is based upon its excess net
capital as determined in accordance with SEC Rule 15c3-1. As of March 31, 1999,
our NYSE minimum required dollar amount of net liquid assets was $91.5 million
compared to actual net liquid assets of approximately $109.6 million.

Failure to maintain the required net capital and net liquid assets may
subject us to suspension or revocation of SEC registration or suspension or
expulsion by the NYSE.

COMPETITION

We obtain each of our new listings on the NYSE by participating in an
allocation process. As part of this process, either the allocation committee of
the NYSE or the listing company chooses the specialist firm. We compete with
other specialist firms based on a number of factors, including:

- the strength of our capital base;

- our willingness to commit our own capital and trade for our own account
while conducting our specialist operations; and

- the ancillary services we offer our specialist companies, such as
providing information on the trading activities in their stocks.

The following is a list of the top ten specialist units as of June 1, 1999,
based on their number of common stock listings:

- Fleet Specialists, Inc.

- Spear, Leeds & Kellogg

- LaBranche & Co.

- Equitrade Partners LLC

- Wagner, Stott, Mercator LLC

- Robb Peck McCooey Specialist Corp.

- Henderson Bros., Inc.

- Bear/Hunter Specialists, LLC

- CMJ Partners LLC

- MJ Meehan & Co., LLC

The competition for obtaining new listed companies is intense. We expect
competition to continue and intensify in the future. Some of our competitors may
have significantly greater financial resources than we have and may also have
greater name recognition. These competitors may be able to respond more quickly
to new or evolving opportunities and listed company requirements. They may also
be able to undertake more extensive promotional activities to attract new
listing companies. In addition, the specialist industry has recently been
consolidating. The combined companies resulting from the consolidation may have
a stronger capital position. This trend has intensified the competition in our
industry. We cannot be sure that we will be able to compete effectively with our
current or future competitors. We also cannot be sure that the competitive
pressures we face will not have an adverse effect on our business, financial
condition and/or operating results.

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<PAGE>
NYSE listed stocks may be traded:

- by NYSE members over-the-counter as long as the stocks were listed after
April 26, 1979. Approximately 70.0% of the NYSE-listed stocks may be
traded by NYSE members over-the-counter; and

- by non-NYSE members over-the-counter.

Technological advances have also contributed to the recent emergence of
trading through alternative trading systems, such as electronic communication
networks and crossing systems. In April 1999, the SEC ruled that alternative
trading systems can apply and, in specified cases, are required to register as
stock exchanges, subject to regulation as a stock exchange. This would enable
NYSE members to trade all NYSE listed stocks on these networks, regardless of
when the stocks were originally listed. These networks may be developed,
organized and operated by large brokerage houses and investment banks with
greater capital, better access to technology and direct access to investors. As
a result, these parties may be well-positioned to direct trading to these
networks. These alternative trading systems may adversely affect the trading of
NYSE-listed stock through specialists on the NYSE. That, in turn, would have an
adverse effect on our business.

The NYSE faces competition from Nasdaq for new listings. Nasdaq continues to
grow and gain in popularity, attracting companies which might otherwise have
listed on the NYSE. In recent years in particular, many high technology
companies have opted to be quoted on Nasdaq, even though many of them would have
qualified for NYSE listing. If more companies decide to be quoted on Nasdaq as
opposed to listing their stocks on the NYSE, trading volume on the NYSE could be
adversely affected.

EMPLOYEES

As of June 1, 1999, we had 161 full-time employees, including 36 managing
directors, with:

- 48 specialists, including 34 managing directors;

- five traders in our proprietary trading department;

- 85 trading assistants;

- five Corporate Relations Department employees; and

- 18 management, administration and finance staff, including two managing
directors.

Our employees are not covered by a collective bargaining agreement. We have
never experienced an employment-related work stoppage. We consider our employee
relations to be good.

Following our reorganization and the completion of this offering, three of
our managing directors will retire from our firm.

PROPERTIES

Currently, our main offices are located at One Exchange Plaza, New York, New
York. We lease approximately 23,500 square feet at this location. In 1999, our
lease payment will total $684,000. This lease expires in 2008. We also lease two
trading posts on the floor of the NYSE.

LEGAL PROCEEDINGS

We are not a party to any legal proceedings.

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<PAGE>
MANAGEMENT

OUR EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of LaBranche & Co Inc., and their ages
and positions, are:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -------------------------------------------------
<S> <C> <C> <C>
Michael LaBranche...................... 44 Chairman and Chief Executive Officer
James G. Gallagher..................... 52 Executive Vice President and Director
Alfred O. Hayward, Jr.................. 51 Executive Vice President and Director
Michael Naughton....................... 53 Senior Vice President, Specialist Operations
Vincent Flaherty....................... 54 Senior Vice President, Floor Operations
</TABLE>

MICHAEL LABRANCHE has been our Chairman and Chief Executive Officer and a
member of our executive committee since our inception in June 1999. Mr.
LaBranche has served as Chief Executive Officer of LaBranche & Co. since 1996
and has been a specialist with LaBranche & Co. since 1977. Mr. LaBranche has
served on the management committee and executive committee of LaBranche & Co.
since 1988 and as the chairman of the executive committee of LaBranche & Co.
since 1996. He currently is a Governor of the NYSE and is a member of the NYSE's
Market Performance Committee.

JAMES G. GALLAGHER has been our Executive Vice President and a director and
a member of our executive committee since our inception. Mr. Gallagher has
served as the Executive Vice President and a member of the executive committee
of LaBranche & Co. since 1998. Prior to July 1998, Mr. Gallagher was a
specialist and managing partner with Fowler, Rosenau since 1977. Mr. Gallagher
is currently a NYSE Senior Floor Official. Mr. Gallagher has also served for six
years as a NYSE Floor Governor.

ALFRED O. HAYWARD, JR. has been our Executive Vice President and a director
and member of our executive committee since our inception. Mr. Hayward has been
a specialist with LaBranche & Co. since 1983 and was appointed to the executive
committee of LaBranche & Co. in 1994. He currently sits on the NYSE Arbitration
Panel and is involved with NYSE education programs. Mr. Hayward has served as a
NYSE Floor Official and has also served as the Chairman of the Allocation
Committee.

MICHAEL NAUGHTON has been our Senior Vice President since our inception. Mr.
Naughton has been a specialist with LaBranche & Co. since 1979 and was appointed
to the executive committee of LaBranche & Co. in 1990.

VINCENT FLAHERTY has been our Senior Vice President since our inception. Mr.
Flaherty has been a specialist with LaBranche & Co. since 1997. Prior to joining
our specialist firm, Mr. Flaherty was the managing partner of Ernst, which he
joined in 1963.

BOARD COMMITTEES

The audit committee of our board of directors will be established prior to
the closing of this offering and will review, act on and report to our board of
directors with respect to various auditing and accounting matters, including the
recommendation of our auditors, the scope of our annual audits, fees to be paid
to our auditors, the performance of our independent auditors and our accounting
practices.

The compensation committee of our board of directors will be established
prior to the closing of this offering and will recommend, review and oversee
salaries, bonuses, benefits and equity incentives for our employees, consultants
and directors. The compensation committee will also administer our incentive
compensation plans.

50
<PAGE>
DIRECTOR COMPENSATION

We intend to elect two non-employee directors prior to the completion of
this offering. It is anticipated that non-employee directors will receive an
annual retainer plus options to purchase our common stock. Our employee
directors will not receive any additional compensation for serving on our board
or any committee of our board.

EXECUTIVE COMPENSATION

Historically, our managing directors have all been members of LaB Investing,
the general partner of LaBranche & Co. The aggregate amount of compensation
received by all our managing directors generally approximated LaB Investing's
interest in LaBranche & Co.'s income before managing directors' compensation.
These payments of compensation have been allocated among our managing directors
based on the managing directors' respective percentage interests in the profits
of LaB Investing. Following this offering, we will conduct business in corporate
form. As a result, we believe that historical data does not provide a meaningful
basis for evaluating anticipated executive compensation following this offering.

The following table sets forth the annual salary we intend to pay our Chief
Executive Officer and our four other executive officers named under "--Directors
and Executive Officers" (the "Named Executive Officers") during fiscal 1999. The
Named Executive Officers will also be entitled to participate in our Annual
Incentive Plan. Under this plan, a bonus pool of up to 30% of our pre-tax income
will be set aside for our managing directors and other employees. The amounts
payable under the Annual Incentive Plan to the Named Executive Officers will be
dependent on our operating results and upon the overall performance of the Named
Executive Officers, as determined by the compensation committee of our board of
directors. In addition, the Named Executive Officers will be entitled to
participate in our Equity Incentive Plan. Our Annual Incentive Plan and Equity
Incentive Plan are described below under "Incentive Awards to Our Employees."

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION YEAR ANNUAL SALARY(1)
- ---------------------------------------------------------------------------------------- --------- ----------------
<S> <C> <C>
Michael LaBranche....................................................................... 1999 $ 250,000
Chairman and Chief Executive Officer
James G. Gallagher...................................................................... 1999 250,000
Executive Vice President
Alfred O. Hayward, Jr................................................................... 1999 250,000
Executive Vice President
Michael J. Naughton..................................................................... 1999 250,000
Senior Vice President, Specialist Operations
Vincent J. Flaherty..................................................................... 1999 250,000
Senior Vice President, Floor Operations
</TABLE>

- ------------------------------

(1) The actual salary paid to the Named Executive Officers will be a prorated
portion of these amounts for fiscal 1999.

EMPLOYMENT AGREEMENTS AND NONCOMPETITION AGREEMENTS

As part of the reorganization of our firm from partnership to corporate
form, our managing directors, all of whom are members of LaB Investing, will
exchange their membership interests in LaB Investing for shares of our common
stock. We have entered into employment agreements (the "Employment Agreements")
with each member who will continue as a managing director after this offering
and pledge agreements (the "Pledge Agreements") and agreements regarding
noncompetition and other covenants (the "Noncompetition Agreements") with all
members, whether or not they continue to be employed with us following this
offering, including, in both cases, each managing director who is a member of
our board of directors or is an executive officer. The material terms of the

51
<PAGE>
Employment, Noncompetition and Pledge Agreements are described below. You should
refer to the exhibits that are a part of the registration statement for copies
of the forms of these agreements. See "Available Information."

THE EMPLOYMENT AGREEMENTS

The Employment Agreements will have initial terms of three to five years,
will require our managing directors to devote their entire working time to our
business and affairs and will be terminable on 90 days' notice by either party.

THE NONCOMPETITION AGREEMENTS

Each Noncompetition Agreement contains the following provisions:

CONFIDENTIALITY. Each managing director is required to protect and use
"confidential information" in accordance with the restrictions which we place on
its use and disclosure.

NONCOMPETITION. During employment and until the later of 12 months
following termination of employment with us and the fifth anniversary of this
offering, a managing director may not:

- form, or acquire a 5% or greater ownership, voting or profit participation
interest in, any competitive enterprise; or

- associate with any competitive enterprise and in connection with such
association engage in, or directly or indirectly manage or supervise
personnel engaged in, any business activity that is related to that
managing director's activities with us.

For this purpose, a "competitive enterprise" is any business enterprise that
engages in activity, or owns a significant interest in an entity that engages in
activity, that competes, directly or indirectly, with any activity in which we
are engaged. These activities include, without limitation, specialist services
and/or sercurities brokerage, sales, lending, custody, clearance, settlement or
trading.

NONSOLICITATION. During employment and until the later of 12 months
following termination of employment with us and the fifth anniversary of this
offering, a managing director may not, directly or indirectly:

- solicit any of our listed companies;

- interfere with or damage any relationship between us and any of our listed
companies or prospective allocated companies; or

- solicit any of our employees to apply for, or accept employment with, any
competitive enterprise.

TRANSITION ASSISTANCE. The Noncompetition Agreements will also provide that
each managing director will take all actions and do all things reasonably
requested by us during a 90-day transition period following termination of
employment to maintain the business, goodwill and business relationships in
which or with which he or she was previously involved on our behalf.

LIQUIDATED DAMAGES. If a managing director breaches the noncompetition or
nonsolicitation provisions of the Noncompetition Agreement before the fifth
anniversary of the date of the completion of this offering, then he or she will
be liable for liquidated damages in an amount equal to 75% of the aggregate
value of the common stock and cash received by that managing director from us in
exchange for his or her membership interest in LaB Investing. The liquidated
damages are in addition to the forfeiture of any future equity-based awards that
may occur as a result of the breach of noncompetition or nonsolicitation
conditions to which those awards may be subject.

52
<PAGE>
THE PLEDGE AGREEMENTS

Under the Pledge Agreements, the liquidated damages obligations under each
Noncompetition Agreement are secured by a pledge of common stock with an initial
value equal to 100% of the liquidated damages amount. The Pledge Agreement will
terminate with respect to a managing director on the earlier to occur of:

- the death of the managing director; and

- the fifth anniversary of the date of the completion of this offering.

NONEXCLUSIVITY AND ARBITRATION

The liquidated damages and pledge arrangements discussed above are not
exclusive of any injunctive relief to which we may be entitled for a breach of a
covenant against competition or solicitation. After the expiration of the Pledge
Agreements, we will be entitled to all available remedies for a breach of the
Noncompetition Agreements. The Employment and Noncompetition Agreements
generally provide that any disputes thereunder will be resolved by binding
arbitration.

INCENTIVE AWARDS TO OUR EMPLOYEES

THE EQUITY INCENTIVE PLAN

The following is a description of the material terms of the LaBranche & Co
Inc. Equity Incentive Plan (the "Equity Incentive Plan"), which will become
effective prior to the closing of this offering. You should, however, refer to
the exhibits that are a part of the registration statement for a copy of the
Equity Incentive Plan. See "Available Information."

Immediately prior to the closing of this offering, we will grant to some of
our employees who are not managing directors options to purchase an aggregate of
shares of our common stock at the initial public offering price and
shares of restricted stock or restricted stock units.

TYPES OF AWARDS. The Equity Incentive Plan provides for grants of options
intended to qualify as incentive stock options ("ISOs") (within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")),
options which do not qualify as ISOs ("NQSOs"), restricted stock and restricted
stock units.

AVAILABLE SHARES. A maximum of shares of our common stock has been
reserved for issuance under the Equity Incentive Plan. The number of shares
reserved is subject to equitable adjustment upon the occurrence of any increase
in, decrease in, or exchange of the outstanding shares of our common stock
through merger, consolidation, recapitalization, reclassification, stock split,
reverse stock split, stock dividend or similar corporate transaction. These
shares may be authorized but unissued shares of our common stock or issued
shares of our common stock held in our treasury or otherwise acquired for the
purposes of the Equity Incentive Plan. New awards may be granted under the
Equity Incentive Plan with respect to shares of our common stock covered by any
award that terminates or expires by its terms (by cancellation or otherwise) or
with respect to shares of our common stock that are withheld or surrendered to
satisfy a recipient's income tax or other withholding obligations or tendered to
pay the exercise price of any option.

The maximum number of shares of our common stock with respect to which
options, restricted stock or restricted stock units may be granted under the
Equity Incentive Plan during any calendar year to any employee may not exceed
shares, subject to adjustment upon certain corporate transactions (as
described above).

53
<PAGE>
ELIGIBILITY. Awards under the Equity Incentive Plan may be granted to any
of our directors, officers, managing directors or other employees, including any
prospective employee, and to any of our advisors or consultants selected by the
compensation committee of our board of directors.

ADMINISTRATION. The Equity Incentive Plan is administered by the
compensation committee who are appointed by our board of directors. The
compensation committee has full discretion and authority to make awards under
the Equity Incentive Plan, to apply and interpret the provisions of the Equity
Incentive Plan and to take such other actions as may be necessary or desirable
in order to carry out the provisions of the Equity Incentive Plan. The
determinations of the compensation committee on all matters relating to the
Equity Incentive Plan and the options, restricted stock and restricted stock
units granted thereunder will be final, binding and conclusive.

STOCK OPTIONS. The exercise price of an option granted under the Equity
Incentive Plan will not be less than the fair market value of our common stock
on the date of grant (as determined under the plan). Unless sooner terminated or
exercised, options will generally expire ten years from the date of grant.
Unless otherwise determined by the compensation committee, options will become
exercisable in three equal annual installments commencing on the first
anniversary of the date of grant (subject to acceleration upon an optionee's
death). Payment for shares acquired upon the exercise of an option may be made
(as determined by the compensation committee) in cash and/or such other form of
payment as may be permitted under the option agreement, including, without
limitation, previously-owned shares of our common stock or pursuant to a
broker's cashless exercise procedure. Except as otherwise permitted by the
compensation committee, no option may be exercised more than 30 days after
termination of the optionee's service (or, if the optionee's service is
terminated by reason of disability or death, one year thereafter). An optionee
will not have any of the rights of a stockholder with respect to shares subject
to an option until the issuance of such shares.

RESTRICTED STOCK. The compensation committee may grant restricted shares of
common stock in amounts, and subject to terms and conditions (such as time
vesting and/or performance-based vesting criteria) as it may determine.
Generally, prior to vesting, the recipient will have the rights of a stockholder
with respect to the restricted stock, subject to any restrictions and conditions
as the compensation committee may include in the award agreement.

RESTRICTED STOCK UNITS. The compensation committee may grant restricted
stock units in amounts, and subject to terms and conditions, as the compensation
committee may determine. Recipients of restricted stock units have only the
rights of our general unsecured creditors and no rights as a stockholder until
the common stock underlying the restricted stock units, if any, is delivered to
the recipient.

CHANGE IN CONTROL. In the event we undergo a "change in control" (as defined
in the Equity Incentive Plan), the compensation committee, in its sole
discretion, may determine at the time of a change in control that all
outstanding options, restricted stock and restricted stock units will become
fully vested and, if applicable, exercisable.

NONASSIGNABILITY. Except to the extent otherwise provided in an award
agreement or approved by the compensation committee (with respect to NQSOs), no
award granted under the Equity Incentive Plan will be assignable or transferable
other than by will or by the laws of descent and distribution and all options
will be exercisable during the life of a recipient only by the recipient or his
or her legal representative.

AMENDMENT AND TERMINATION. The Equity Incentive Plan may be amended or
terminated at any time by the Board of Directors, subject, however, to
stockholder approval in the case of certain material amendments, such as an
increase in the number of shares available under the Equity Incentive Plan or a
change in the class of individuals eligible to participate in the Equity
Incentive Plan.

54
<PAGE>
U.S. FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description
of the material U.S. federal income tax consequences generally arising with
respect to awards granted under the Equity Incentive Plan.

The grant of an option will have no income tax consequences to the recipient
or to us. Upon the exercise of an option, other than an ISO, the recipient
generally will recognize ordinary income equal to the excess of the fair market
value of the shares of common stock subject to the option on the date of
exercise over the exercise price for such shares (i.e., the option spread), and
we generally will be entitled to a corresponding tax deduction in the same
amount. Upon the sale of the shares of our common stock acquired pursuant to the
exercise of an option, the recipient will recognize capital gain or loss equal
to the difference between the selling price and the sum of the exercise price
plus the amount of ordinary income recognized on the exercise.

A recipient generally will not recognize ordinary income upon the exercise
of an ISO (although, on exercise, the option spread is an item of tax preference
income potentially subject to the alternative minimum tax and we will not
receive any deduction). If the stock acquired upon exercise of an ISO is sold or
otherwise disposed of within two years from the option grant date or within one
year from the exercise date, then gain realized on the sale generally is treated
as ordinary income to the extent of the ordinary income that would have been
realized upon exercise if the option had not been an ISO, and we generally will
be entitled to a corresponding deduction in the same amount. Any remaining gain
is treated as capital gain.

If the shares acquired upon the exercise of an ISO are held for at least two
years from the grant date and one year from the exercise date and the recipient
is employed by us at all times beginning on the grant date and ending on the
date three months prior to the exercise date, then all gain or loss realized
upon the sale will be capital gain or loss and we will not receive any
deduction.

In general, an individual who receives an award of restricted stock will
recognize ordinary income at the time such award vests in an amount equal to the
difference between the value of the vested shares and the purchase price for
such shares, if any, and we generally will be entitled to a deduction in an
amount equal to the ordinary income recognized by the recipient at such time.

The recipient of an award of restricted stock units generally will recognize
ordinary income upon the issuance of the shares of common stock underlying such
restricted stock units in an amount equal to the difference between the value of
such shares and the purchase price for such units and/or shares, if any, and we
generally will be entitled to a deduction in an amount equal to the ordinary
income recognized by the recipient a such time.

THE ANNUAL INCENTIVE PLAN

Prior to the closing of this offering, the board of directors, will adopt,
effective upon the closing of this offering, the LaBranche & Co Inc. Annual
Incentive Plan. All LaBranche & Co. employees selected by the compensation
committee of our board of directors will be eligible to participate in the
Annual Incentive Plan. Under this plan, a bonus pool of up to 30% of our pre-tax
income will be set aside for our managing directors and other employees. The
amounts payable under the Annual Incentive Plan to our employees will be
reviewed on an annual basis and will be dependent on our operating results and
upon the overall performance of the employees, as determined by the compensation
committee. An award made by the compensation committee to any employee is
completely discretionary. The Annual Incentive Plan may be amended or terminated
at any time by our board of directors.

55
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock after giving effect to this offering, by: (i) each
person known to beneficially own more than 5.0% of the outstanding shares of
common stock; (ii) each of our directors; (iii) each named executive officer;
and (iv) all executive officers and directors as a group. All persons listed
have sole voting and investment power with respect to their shares unless
otherwise indicated. Unless otherwise indicated, the address of the beneficial
owners is: c/o One Exchange Plaza, New York, New York, 10006. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of common stock issuable pursuant to options, to
the extent such options are currently exercisable or convertible within 60 days
of , 1999, are treated as outstanding for computing the percentage
of the person holding such securities but are not treated as outstanding for
computing the percentage of any other person.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
BENEFICIALLY
OWNED
SHARES ---------------
NAME AND ADDRESS BENEFICIALLY BEFORE
OF BENEFICIAL OWNER OWNED OFFERING
- --------------------------------------------------------------------------------- ------------------- ---------------
<S> <C> <C>
Michael LaBranche(1).............................................................
James G. Gallagher(1)............................................................
Alfred O. Hayward, Jr.(1)........................................................
Michael Naughton(1)..............................................................
Vincent Flaherty(1)..............................................................
All executive officers and directors as a group(1)...............................

<CAPTION>
NAME AND ADDRESS AFTER
OF BENEFICIAL OWNER OFFERING
- --------------------------------------------------------------------------------- ---------------
<S> <C>
Michael LaBranche(1).............................................................
James G. Gallagher(1)............................................................
Alfred O. Hayward, Jr.(1)........................................................
Michael Naughton(1)..............................................................
Vincent Flaherty(1)..............................................................
All executive officers and directors as a group(1)...............................
</TABLE>

- ------------------------------

(1) Each of our managing directors, including all our executive officers, have
entered into a stockholders' agreement, the terms of which are described
under "Certain Transactions--Reorganization and Related
Transactions--Stockholders' Agreement." As a result of the stockholders'
agreement, Messrs. LaBranche, Gallagher and Hayward may be deemed to share
the beneficial ownership of the shares of our common stock subject to the
stockholders' agreement. Each of Messrs. LaBranche, Gallagher and Hayward in
their individual capacities disclaims such beneficial ownership in respect
of the shares not directly owned by them.

56
<PAGE>
CERTAIN TRANSACTIONS

REORGANIZATION AND RELATED TRANSACTIONS

REORGANIZATION

Concurrently with this offering, we will complete a number of transactions
in order to effect the reorganization of our firm from partnership to corporate
form. These transactions are summarized below:

- The 36 members of LaB Investing have agreed, subject to the completion of
this offering, to exchange their membership interests in LaB Investing
which represented a 69.8% interest in the profit of LaBranche & Co. for an
aggregate of shares of our common stock. In addition, three members
of LaB Investing will receive an aggregate of $10.0 million in cash as
part of their exchange. All the members of LaB Investing are managing
directors, and all members who will remain employed by us following this
offering are only receiving shares of our common stock, and no cash, in
the reorganization. We thus will become the sole member of LaB Investing,
and LaB Investing will continue to be the general partner of LaBranche &
Co. Our common stock to be received by the members of LaB Investing will
be subject to certain restrictions, as described below under
"--Stockholders' Agreement." Set forth below is the percentage interest in
the profits of LaBranche & Co. owned by each of our Named Executive
Officers, as members of LaB Investing, before giving effect to the
reorganization and the number of shares of our common stock that each of
our Named Executive Officers will receive upon the closing of this
offering:

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PERCENTAGE INTEREST IN OUR COMMON STOCK
PROFITS OF TO BE
NAMED EXECUTIVE OFFICER LABRANCHE & CO. RECEIVED
- ------------------------------------------- ----------------------- -----------------------------
<S> <C> <C>
Michael LaBranche.......................... 5.3%
James G. Gallagher......................... 3.6
Alfred O. Hayward, Jr...................... 3.6
Michael Naughton........................... 3.6
Vincent Flaherty........................... 5.0
</TABLE>

- The 19 limited partners of LaBranche & Co., other than Mill Bridge, Inc.,
have agreed, subject to the completion of this offering, to exchange their
limited partnership interests in LaBranche & Co. which represented a 16.0%
interest in the profits of LaBranche & Co. to us in exchange for an
aggregate of $68.4 million in cash and shares of our common stock.
The shares of our common stock received by limited partners will be
subject to lock-up restrictions which will prohibit the transfer of 50% of
those shares for a period of one year and the remaining 50% for a period
of two years following this offering.

- Mill Bridge, Inc., a subsidiary of Van der Moolen Holding NV, will receive
$90.0 million from us, including $74.0 million in cash upon the closing of
this offering and our subordinated note for $16.0 million, in exchange for
its limited partnership interest in LaBranche & Co., which represented a
14.2% interest in the profit of LaBranche & Co.

- As a result of the above transactions, we will become the sole limited
partner of LaBranche & Co., which will continue to be a broker-dealer and
a NYSE specialist firm.

- We will grant options to purchase an aggregate of shares of our
common stock and shares of restricted stock or restricted stock units
to employees who are not managing directors. The options vest, subject to
continuing service and other conditions, in three equal annual
installments on the first, second and third anniversaries of this
offering. The shares of restricted

57
<PAGE>
stock or restricted stock units vest, subject to continuing service and
other conditions, in three equal annual installments on the third, fourth
and fifth anniversaries of this offering.

STOCKHOLDERS' AGREEMENT

We intend to enter into a stockholders' agreement with all 36 members of LaB
Investing who will be receiving our common stock in the reorganization, 33 of
whom will remain managing directors following this offering, and with the
employees who will receive options and restricted stock or restricted stock unit
awards in connection with the reorganization. This stockholders' agreement will
contain various restrictions on the transfer of our stock by the parties to such
agreement and a voting agreement.

TRANSFER RESTRICTIONS. The stockholders' agreement will prohibit the
transfer of our shares by the former members of LaB Investing and our employees
who receive our common stock in the reorganization for a period of three years
following this offering. Beginning on the third anniversary of this offering, up
to one-third of these shares may be transferred. Beginning on the fourth
anniversary, up to an additional one-third of these shares may be transferred,
and beginning on the fifth anniversary, all of these shares may be transferred.
Notwithstanding this,

- if the stockholder is employed by us, at all times during the course of
his or her employment, he or she must retain at least 25% of the aggregate
of the shares of our common stock received in the reorganization and other
shares received under the Equity Incentive Plan or similar plans; and

- an employee may not sell shares of our common stock which are subject to a
Pledge Agreement, unless the requirements of the Pledge Agreement are
waived by us.

VOTING AGREEMENT. The shares owned by each party to the stockholders'
agreement will be voted at the general stockholder vote as directed by Messrs.
LaBranche, Gallagher and Hayward, as determined by a majority of those
individuals. These individuals will name alternates to replace them in the event
of their death or disability.

INTEREST ON CAPITAL

The members of LaB Investing have historically contributed capital to LaB
Investing, which was, in turn, contributed to LaBranche & Co. For 1998, the
Named Executive Officers listed below earned interest income on their capital
contributions in the amounts set forth opposite their names:

<TABLE>
<CAPTION>
CAPITAL INTEREST
NAME INCOME
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Vincent J. Flaherty........................................................................ $ 164,400
James G. Gallagher......................................................................... 149,332
Alfred O. Hayward, Jr...................................................................... 274,017
Michael LaBranche.......................................................................... 428,015
Michael J. Naughton........................................................................ 293,061
</TABLE>

LEASE PAYMENT ON MEMBERSHIPS

Certain of our Named Executive Officers have contributed the use of their
NYSE membership to LaBranche & Co. and receive lease payments from LaBranche &
Co. based on the market value of the

58
<PAGE>
membership. For 1998, the Named Executive Officers listed below received
payments from LaBranche & Co. in the amounts set forth opposite their names:

<TABLE>
<CAPTION>
NAME LEASE INCOME
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
James G. Gallagher......................................................................... $ 180,000
Michael LaBranche.......................................................................... 180,000
Michael J. Naughton........................................................................ 180,000
</TABLE>

INTEREST ON INDEBTEDNESS

Mr. Flaherty's spouse holds $600,000 of subordinated debt due August 31,
1999 and Mr. LaBranche's spouse holds $1.3 million of secured subordinated
indebtedness due March 2, 2000. This debt bears interest at an annual rate of
10.0% payable on a quarterly basis. The agreements relating to this debt have
automatic rollover provisions which extend the maturities for an additional
year, unless the lender provides notice at least seven months prior to maturity.
The interest income in 1998 for Mr. Flaherty's spouse was $60,000 and the
interest income in 1998 for Mr. LaBranche's spouse was $71,250.

DESCRIPTION OF CAPITAL STOCK

Upon the closing of this offering and the filing of the amendment to our
certificate of incorporation referred to below, our authorized capital stock
will consist of shares of common stock, $.01 par value, and
shares of preferred stock, $.01 par value. Upon the closing of the
offering, and after giving effect to the issuance of shares of
common stock offered by us hereby, there will be shares of common
stock and no shares of preferred stock issued and outstanding. See "--Preferred
Stock."

COMMON STOCK

Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the board of directors from time to time may
determine. Holders of common stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders. Cumulative voting for the
election of directors is not authorized by our certificate of incorporation,
which means that the holders of a majority of the shares voted can elect all of
the directors then standing for election. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Upon our
liquidation, dissolution or winding-up, the assets legally available for
distribution to stockholders shall be distributed ratably among the holders of
our common stock after payment of liquidation preferences, if any, on any
outstanding shares of preferred stock and payment of other claims of creditors.
Each outstanding share of common stock is, to be outstanding upon completion of
this offering will be upon payment therefor, duly and validly issued, fully paid
and nonassessable.

There is currently no active trading market for our common stock.
Application will be made to have our common stock approved for listing on the
NYSE under the symbol "LAB."

PREFERRED STOCK

The authorized shares of preferred stock may by issued in one or more
series without further stockholder authorization, and the board of directors is
authorized to fix and determine the terms, limitations and relative rights and
preferences of the preferred stock, to establish series of preferred stock and
to fix and determine the variations as among series. If we issue preferred
stock, it would have priority over our common stock with respect to dividends
and to other distributions, including the distribution of assets upon
liquidation, and we may be obligated to repurchase or redeem

59
<PAGE>
it. The board of directors can issue preferred stock without the approval of our
common stockholders. Preferred stock may have voting and conversion rights
(including multiple voting rights) which could adversely affect the rights of
holders of common stock. In addition to having a preference with respect to
dividends or liquidation proceeds, if preferred stock is issued, it may be
entitled to the allocation of capital gains from the sale of our assets. We do
not have any present plans to issue any more shares of preferred stock.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation, whose stock generally is publicly traded or held of record by more
than 2,000 stockholders, and an "interested stockholder" are prohibited for a
three-year period following the date that such stockholder became an interested
stockholder, unless

- the corporation has elected in its certificate of incorporation or by-laws
not to be governed by the Delaware anti-takeover law (we have not made
such an election);

- the business combination was approved by the board of directors of the
corporation before the other party to the business combination became an
interested stockholder;

- upon consummation of the transaction that made it an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also
officers or held in employee stock plans in which the employees do not
have a right to determine confidentially whether to tender or vote stock
held by the plan); or

- the business combination was approved by the board of directors of the
corporation and ratified by two-thirds of the voting stock which the
interested stockholder did not own. The three-year prohibition does not
apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain
extraordinary transactions involving the corporation and a person who had
not been an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of the
corporation's directors. The term "business combination" is defined
generally to include mergers or consolidations between a Delaware
corporation and an interested stockholder, transactions with an interested
stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested
stockholder" is defined generally as a stockholder who becomes beneficial
owner of 15% or more of a Delaware corporation's voting stock. Section 203
could have the effect of delaying, deferring or preventing a change in
control of LaBranche & Co Inc.

In addition, provisions of our certificate of incorporation and by-laws
which will take effect upon the closing of the offering and which are summarized
in the following paragraphs, may have an anti-takeover effect and may delay,
defer or prevent a tender offer or takeover attempt that a stockholder might
consider in its best interest, including those attempts that might result in a
premium over the market price for the shares held by our stockholders.

CLASSIFIED BOARD OF DIRECTORS

Our board of directors is divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board of
directors will be elected each year. These provisions, when coupled with the
provision of our certificate of incorporation authorizing the board of directors
to fill vacant directorships or increase the size of the board of directors, may
deter a

60
<PAGE>
stockholder from removing incumbent directors and simultaneously gaining control
of the board of directors by filling the vacancies created by such removal with
its own nominees.

STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS

Our by-laws provide that our stockholders may not take action by written
consent, but only at an annual or special meeting of stockholders. Our by-laws
further provide that special meetings of our stockholders may be called only by
the chairman of the board of directors or a majority of the board of directors.

SUPERMAJORITY VOTING PROVISIONS

Our certificate of incorporation provides that the affirmative vote of at
least two-thirds of our stockholders is required to amend the provisions of our
certificate and by-laws relating to the classification of the board of
directors, stockholder action by written consent and the calling of special
meetings.

AUTHORIZED BUT UNISSUED SHARES

The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized by unissued common stock and
preferred stock could render more difficult or discourage an attempt to obtain
control of LaBranche & Co Inc. by means of a proxy contest, tender offer, merger
or otherwise.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

We will enter into indemnification agreements with our current directors and
executive officers. These provisions and agreements may have the practical
effect in some cases of eliminating our stockholders' ability to collect
monetary damages from our directors. We believe that these contractual
agreements and the provisions in our certificate of incorporation and by-laws
are necessary to attract and retain qualified persons as directors and officers.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the common stock is .

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock, and we cannot predict the effect, if any, that market sales of shares or
the availability of any shares for sale will have on the market price of the
common stock prevailing from time to time. Sales of substantial amounts of
common stock, or the perception that such sales could occur, could adversely
affect the market price of our common stock and our ability to raise capital
through a sale of our securities.

Upon completion of this offering, we will have shares of common
stock outstanding (or shares if the underwriters over-allotment
option is exercised in full) of which

61
<PAGE>
will be "restricted shares." This leaves shares eligible
for sale in the public market as follows:

In addition:

- each of our managing directors must retain 25% of his or her common stock,
currently totaling shares in the aggregate, for the duration of his
or her employment; and

- an employee may not sell shares of our common stock that are subject to a
Pledge Agreement, unless the requirements of the Pledge Agreement are
waived by us.

The shares (or up to shares is the underwriters'
over-allotment option is exercise in full) of common stock sold in this offering
will be freely tradable without further restriction or further registration
under the Securities Act, except for shares purchased by any of our affiliates
(as this term is defined in the Securities Act), which will be subject to the
limitations of Rule 144 under the Securities Act. Subject to certain contractual
limitations, holders of restricted shares generally will be entitled to sell
these shares in the public securities market without registration either
pursuant to Rule 144 or any other applicable exemption under the Securities Act.

In general, under Rule 144 under the Securities Act, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
within the meaning of Rule 144 (Restricted Securities) for at least one year,
and including the holding period of any prior owner except an affiliate, would
be entitled to sell within any three-month period a number of shares that does
not exceed the greater of one percent of the then outstanding shares of common
stock or the average weekly trading volume of the common stock on the NYSE
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain manner of sale provisions, notice requirements and the
availability of current public information about LaBranche & Co Inc. Any person
(or persons whose shares are aggregated) who is not deemed to have been our
affiliate at any time during the three months preceding a sale, and who has
beneficially owned shares for at least two years (including any period of
ownership of preceding non-affiliated holders), would be entitled to sell such
shares under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements or notice requirements. An
"affiliate" is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or under common control with,
such issuer.

We intend to file one or more registration statements under the Securities
Act to register shares of common stock subject to outstanding stock
options or reserved for issuance

62
<PAGE>
under our equity compensation plans. Upon completion of this offering, options
to purchase approximately shares will be outstanding under our
equity compensation plans.

Our directors and officers and our stockholders who hold shares
in the aggregate (including options and warrants to purchase common stock) have
entered into lock-up agreements pursuant to which they have agreed that they
will not sell other than in connection with this offering, directly or
indirectly, any shares of common stock without the prior written consent of
Salomon Smith Barney Inc. for a period of 180 days from the date of this
prospectus; provided, however, they may gift or transfer shares so long as the
donee or transferee agrees to be bound by the terms of the lock-up agreement.

63
<PAGE>
UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to such underwriter, the number of shares
set forth opposite the name of such underwriter.

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ------------------------------------------------------------------------------------ -----------
<S> <C>
Salomon Smith Barney Inc............................................................
Donaldson, Lufkin & Jenrette Securities Corporation.................................
-----
Total...........................................................................
-----
-----
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.

The underwriters, for whom Salomon Smith Barney Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation are acting as representatives, propose to offer
some of the shares directly to the public at the public offering price set forth
on the cover page of this prospectus and some of the shares to certain dealers
at the public offering price less a concession not in excess of $
per share. The underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share on sales to certain other
dealers. If all of the shares are not sold at the initial offering price, the
representatives may change the public offering price and the other selling
terms. The representatives have advised us that the underwriters do not intend
to confirm any sales to any accounts over which they exercise discretionary
authority.

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to additional shares of common
stock at the public offering price less the underwriting discount. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the offering. To the extent such
option is exercised, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares approximately
proportionate to such underwriter's initial purchase commitment.

We and our officers, directors and stockholders have agreed that, for a
period of 180 days from the date of this prospectus, they will not, without the
prior written consent of Salomon Smith Barney Inc., dispose of or hedge any
shares of our common stock or any securities convertible into or exchangeable
for our common stock. Salomon Smith Barney Inc. in its sole discretion may
release any of the securities subject to these lock-up agreements at any time
without notice.

Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price for the shares was
determined by negotiations between us and the representatives. Among the factors
considered in determining the initial public offering price were our record of
operations, our current financial condition, our future prospects, our markets,
the economic conditions in and future prospects for the industry in which we
compete, our management, and currently prevailing general conditions in the
equity securities markets, including current market valuations of publicly
traded companies considered comparable to us. There can be no assurance,
however, that the prices at which the shares will sell in the public market
after this offering will not be lower than the price at which they are sold by
the underwriters or that an active trading market in the common stock will
develop and continue after this offering.

LaBranche & Co Inc. will apply to have the common stock listed on the NYSE
under the symbol "LAB."

64
<PAGE>
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock.

<TABLE>
<CAPTION>
FULL
NO EXERCISE EXERCISE
----------- ------------
<S> <C> <C>
Per share.......................................................... $ $
Total.............................................................. $ $
</TABLE>

In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of common stock
made for the purpose of preventing or retarding a decline in the market price of
the common stock while the offering is in progress.

The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.

Any of these activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
such transactions. These transactions may be effected on the NYSE or in the
over-the-counter market, or otherwise and, if commenced, may be discontinued at
any time.

We estimate that our total expenses of this offering will be $ .

The representatives may, from time to time, engage in transactions with and
perform services for us in the ordinary course of their business.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.

65
<PAGE>
LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for LaBranche & Co Inc. by Fulbright & Jaworski L.L.P., New York, New York.
Certain legal matters in connection with the offering will be passed upon for
the underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York.

EXPERTS

The financials statements and schedule of LaB Investing Co. L.L.C. and
Subsidiary included in this prospectus and elsewhere in the registrations
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.

The financials statements of Fowler, Rosenau & Geary, LLC included in this
prospectus and elesewhere in the registration statement have been auditied by
Sugarman & Thrope, P.C., independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Commission a registration statement, of which this
prospectus constitutes a part, on Form S-1 under the Securities Act (herein,
together with all amendments and exhibits referred to herein as the
"Registration Statement") with respect to the common stock being sold in this
offering. This prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules to the Registration
Statement, because some parts have been omitted in accordance with rules and
regulations of the Commission. For further information with respect to LaBranche
& Co Inc. and the common stock being sold in this offering, please refer to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this prospectus as to the
contents of any contract, agreement or any other document referred to are not
necessarily complete; reference is made in each instance to the copy of such
contract or document filed as an exhibit to the Registration Statement. Each
such statement is qualified in all respects by such reference to such exhibit. A
copy of the Registration Statement, including exhibits and schedules thereto,
may be inspected without charge and obtained at prescribed rates at the Public
Reference Section of the Commission at its principal offices, located at 450
Fifth Street, N.W., Washington, D.C. 20549, and may be inspected without charge
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. The Registration Statement,
including the exhibits and schedules thereto, is also available at the
Commission's site on the World Wide Web at http://www.sec.gov.

We intend to furnish our stockholders annual reports containing financial
statements audited by our independent auditors and quarterly reports containing
unaudited financial information.

66
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
LABRANCHE & CO INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

Pro Forma Consolidated Information (Overview) (unaudited).................................................. F-3

Pro Forma Consolidated Statement of Financial Condition as of March 31, 1999 (unaudited)................... F-5

Pro Forma Consolidated Statement of Operations for the Three Months Ended March 31, 1999 (unaudited)....... F-6

Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 1998 (unaudited)............ F-7

Notes to Pro Forma Consolidated Financial Information (unaudited).......................................... F-8

LAB INVESTING CO. L.L.C. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Public Accountants................................................................... F-9

Consolidated Statements of Financial Condition as of March 31, 1999 (unaudited) and as of December 31, 1998
and 1997................................................................................................. F-10

Consolidated Statements of Operations for the Three Months Ended March 31, 1999 and 1998 (unaudited) and
the Years Ended December 31, 1998, 1997 and 1996......................................................... F-11

Consolidated Statements of Changes in Members' Capital for the Three Months Ended March 31, 1999
(unaudited) and the Years Ended December 31, 1998, 1997 and 1996......................................... F-12

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998 (unaudited) and
the Years Ended December 31, 1998, 1997 and 1996......................................................... F-13

Notes to Consolidated Financial Statements................................................................. F-14

LAB INVESTING CO. L.L.C. (PARENT COMPANY ONLY) CONDENSED FINANCIAL STATEMENTS

Condensed Statements of Financial Condition as of March 31, 1999 (unaudited) and as of December 31, 1998
and 1997................................................................................................. F-19

Condensed Statements of Operations for the Three Months Ended March 31, 1999 and 1998 (unaudited) and the
Years Ended December 31, 1998, 1997 and 1996............................................................. F-20

Condensed Statements of Changes in Members' Capital for the Three Months Ended March 31, 1999 (unaudited)
and the Years Ended December 31, 1998, 1997 and 1996..................................................... F-21

Condensed Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998 (unaudited) and the
Years Ended December 31, 1998, 1997 and 1996............................................................. F-22

Note to Condensed Financial Statements..................................................................... F-23
</TABLE>

F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
FOWLER, ROSENAU & GEARY, L.L.C. FINANCIAL STATEMENTS

Independent Auditor's Report............................................................................... F-24

Statements of Financial Condition as of June 30, 1998, November 30, 1997 and 1996.......................... F-25

Statements of Income for the Seven Months Ended June 30, 1998 and the Years Ended November 30, 1997 and
1996..................................................................................................... F-26

Statements of Changes of Members' Capital for the Seven Months Ended June 30, 1998 and the Years Ended
November 30, 1997 and 1996............................................................................... F-27

Statements of Cash Flows for the Seven Months Ended June 30, 1998 and the Years Ended November 30, 1997 and
1996..................................................................................................... F-28

Notes to Financial Statements.............................................................................. F-29
</TABLE>

F-2
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)

OVERVIEW

The following pro forma consolidated financial information is based on the
historical consolidated financial statements of LaBranche & Co. and LaB
Investing Co. L.L.C. ("LaB Investing"), its sole general partner (together, the
"Partnership"), after giving effect to the acquisition of Fowler, Rosenau &
Geary, LLC ("Fowler, Rosenau") and the reorganization and related transactions
(the "Reorganization Transactions") to convert the Partnership to corporate
form. The Reorganization Transactions are described in greater detail below. The
pro forma consolidated statement of financial condition presents the
Reorganization Transactions as if they occurred on March 31, 1999. The pro forma
as adjusted consolidated statement of financial condition as of March 31, 1999
further gives effect to the completion of the initial public offering. The pro
forma consolidated statement of operations for the three months ended March 31,
1999 and for the year ended December 31, 1998 present the results of the
Partnership as if the Reorganization Transactions had occurred on January 1,
1998. Additionally, the pro forma consolidated statement of operations for the
year ended December 31, 1998 present the results of the Partnership as if the
acquisition of Fowler, Rosenau had occurred on January 1, 1998.

Effective July 1, 1998, the Partnership acquired the specialist operations
of Fowler, Rosenau for an aggregate purchase price of approximately $45.0
million, representing a 22.4% total general and limited partners' interest in
the Partnership. The acquisition of Fowler, Rosenau was accounted for under the
purchase method of accounting. The purchase price consisted of general and
limited partnership interests issued to new partners admitted into the
Partnership. The limited partners' interests were issued by LaBranche & Co. The
excess purchase price over fair value of net assets acquired of approximately
$25.8 million has been allocated to goodwill, which is being amortized over a
15-year period. The following unaudited pro forma consolidated financial
statement of operations for the year ended December 31, 1998 gives effect to
this acquisition as if it had occurred on January 1, 1998, by consolidating the
results of operations of Fowler, Rosenau for the six months ended June 30, 1998
with the results of operations of the Partnership, which include the results of
Fowler, Rosenau after June 30, 1998, for the year ended December 31, 1998.

The members of LaB Investing will exchange their membership interests in LaB
Investing for $10.0 million in cash and shares of common stock of
LaBranche & Co Inc. (the "Exchange"). The Partnership is not currently subject
to federal or state income taxes, but is currently subject to New York City
unincorporated business tax. Following the Exchange, LaBranche & Co Inc., on a
consolidated basis, will be subject to federal, state and local income taxes.
Concurrently with the closing of the offering, the Partnership will complete the
following Reorganization Transactions:

- The limited partners of LaBranche & Co. are assumed to exchange their
interests for $142.4 million in cash, a $16.0 million subordinated note
payable at an interest rate of 9.0% and shares of our common stock.

- $5.0 million of subordinated debt at an interest rate of 10.0% is assumed
to be repaid.

In addition, at approximately the same time as the initial public offering,
LaBranche & Co Inc. will incur indebtedness of approximately $100.0 million at
an assumed interest rate of 9.0%. The proceeds of the indebtedness are assumed
to be primarily used to redeem a portion of the limited partners' interests in
LaBranche & Co. and withdrawing members' interests.

Historically, the Partnership paid substantially all its earnings to its
members as managing directors' compensation. Upon reorganization to corporate
form, compensation to managing directors will approximate up to 30.0% of pre-tax
income, which is assumed to include related employee benefits.

F-3
<PAGE>
LaBranche & Co., as a registered broker-dealer and NYSE specialist firm, is
required to meet regulatory capital requirements. Historically, the capital of
the Partnership has been invested in LaBranche & Co. to meet these requirements.
The redemption of the limited partners' and members' interests and net increase
in subordinated debt described above would result in a pro forma net decrease of
regulatory capital of $157.4 million. However, these redemptions will only be
consummated on the successful completion of the initial public offering.
Therefore, for presentation purposes of the pro forma consolidated statement of
financial condition, it has been assumed that $170.0 million of net proceeds
will be raised to replace the regulatory capital withdrawn to redeem the limited
partners and members' interests.

The pro forma consolidated financial information has been prepared by the
Partnership's management and is not necessarily indicative of the results that
would have been achieved had the acquisition of Fowler, Rosenau and the
Reorganization Transactions occurred on the dates indicated or that may be
achieved in the future. The pro forma consolidated financial information should
be read in conjunction with the audited consolidated financial statements of the
Partnership as of December 31, 1998 and 1997 and the three years in the period
ended December 31, 1998, the notes thereto, and the unaudited consolidated
financial statements as of March 31, 1999 and the three months in the periods
ended March 31, 1999 and 1998, and the notes thereto.

F-4
<PAGE>
LABRANCHE & CO INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

MARCH 31, 1999

(UNAUDITED)

(000'S OMITTED)

<TABLE>
<CAPTION>
PRO FORMA PRO OFFERING PRO FORMA
HISTORICAL ADJUSTMENTS FORMA ADJUSTMENTS AS ADJUSTED
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS................. $ 2,465 $ (57,434) $ (54,969) $ 170,000 $ 115,031
SECURITIES PURCHASED UNDER AGREEMENTS TO
RESELL.................................. 41,000 -- 41,000 -- 41,000
RECEIVABLE FROM BROKERS AND DEALERS....... 33,355 -- 33,355 -- 33,355
SECURITIES OWNED, at market value:
Corporate equities...................... 137,691 -- 137,691 -- 137,691
United States Government obligations.... 1,487 -- 1,487 -- 1,487
Other................................... 1,500 -- 1,500 -- 1,500
COMMISSIONS RECEIVABLE.................... 3,467 -- 3,467 -- 3,467
EXCHANGE MEMBERSHIPS CONTRIBUTED FOR USE,
at market value......................... 20,000 -- 20,000 -- 20,000
EXCHANGE MEMBERSHIPS OWNED, at cost....... 6,300 -- 6,300 -- 6,300
OFFICE EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, at cost, less accumulated
depreciation and amortization........... 1,589 -- 1,589 -- 1,589
GOODWILL.................................. 46,685 -- 46,685 -- 46,685
OTHER ASSETS.............................. 3,799 -- 3,799 -- 3,799
----------- ----------- --------- ----------- -----------
Total assets.......................... $ 299,338 $ (57,434) $ 241,904 $ 170,000 $ 411,904
----------- ----------- --------- ----------- -----------
----------- ----------- --------- ----------- -----------

LIABILITIES AND MEMBERS' CAPITAL
LIABILITIES:
Payable to brokers and dealers.......... $ 43,042 $ -- $ 43,042 -- $ 43,042
Securities sold, but not yet purchased,
at market value....................... 19,442 -- 19,442 -- 19,442
Accrued compensation.................... 36,950 -- 36,950 -- 36,950
Accounts payable and other accrued
expenses.............................. 6,733 -- 6,733 -- 6,733
Other liabilities....................... 1,105 -- 1,105 -- 1,105
----------- ----------- --------- ----------- -----------
107,272 -- 107,272 -- 107,272
----------- ----------- --------- ----------- -----------
LONG TERM DEBT............................ -- 116,000(D) 116,000 -- 116,000
----------- ----------- --------- ----------- -----------
COMMITMENTS............................... -- -- -- -- --

SUBORDINATED LIABILITIES.................. 71,158 (5,000)(C) 66,158 -- 66,158
----------- ----------- --------- ----------- -----------
LIMITED PARTNERS' INTEREST IN
SUBSIDIARY.............................. 35,373 (35,373) (G) -- -- --
----------- ----------- --------- ----------- -----------
MEMBERS' CAPITAL/STOCKHOLDERS' EQUITY..... 85,535 (133,061) (G) (47,526) $ 170,000 122,474
----------- ----------- --------- ----------- -----------
Total liabilities and members'
capital/ stockholders' equity....... $ 299,338 $ (57,434) $ 241,904 $ 170,000 $ 411,904
----------- ----------- --------- ----------- -----------
----------- ----------- --------- ----------- -----------
</TABLE>

See notes to pro forma consolidated financial information.

F-5
<PAGE>
LABRANCHE & CO INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH
31, 1999
-----------------------------------
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
----------- ----------- ---------
<S> <C> <C> <C>
REVENUES:
Net gain on principal transactions....................................... $ 36,366 $ -- $ 36,366
Commissions.............................................................. 8,270 -- 8,270
Other.................................................................... 2,985 -- 2,985
----------- ----------- ---------
Total revenues......................................................... 47,621 -- 47,621
----------- ----------- ---------
EXPENSES:
Employee compensation and benefits....................................... 4,741 10,212(E) 14,953
Lease of exchange memberships............................................ 2,073 -- 2,073
Interest................................................................. 1,099 (125)(C)
2,610(D) 3,584
Exchange, clearing and brokerage fees.................................... 1,007 -- 1,007
Goodwill amortization.................................................... 847 -- 847
Occupancy................................................................ 393 -- 393
Communications........................................................... 257 -- 257
Legal and professional fees.............................................. 75 -- 75
Other.................................................................... 603 -- 603
----------- ----------- ---------
Total expenses before managing directors' compensation, limited
partners' interest in earnings of subsidiary and provision for income
taxes................................................................ 11,095 12,697 23,792
----------- ----------- ---------
Income before managing directors' compensation, limited partners'
interest in earnings of subsidiary and provision for income taxes...... 36,526 (12,697) 23,829
MANAGING DIRECTORS' COMPENSATION........................................... 23,100 (23,100)(E) --
----------- ----------- ---------
Income before limited partners' interest in earnings of subsidiary and
provision for income taxes............................................. 13,426 10,403 23,829
LIMITED PARTNERS' INTEREST IN EARNINGS OF SUBSIDIARY....................... 10,445 (10,445)(H) --
----------- ----------- ---------
Income before provision for income taxes................................. 2,981 20,848 23,829
PROVISION FOR INCOME TAXES................................................. 1,400 9,085(F) 10,485
----------- ----------- ---------
Net income............................................................... $ 1,581 $ 11,763 $ 13,344
----------- ----------- ---------
----------- ----------- ---------
Pro forma basic and diluted net income per share........................... $ (J)
---------
---------
Pro forma weighted average shares outstanding.............................. (J)
---------
---------
</TABLE>

See notes to pro forma consolidated financial information.

F-6
<PAGE>
LABRANCHE & CO INC. AND SUBSIDIARY

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

(000'S OMITTED, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------
PRO FORMA ADJUSTMENTS
---------------------------
REORGANIZATION PRO
HISTORICAL TRANSACTIONS FORMA
----------- FOWLER -------------- ---------
ACQUISITION
-----------
(A)
<S> <C> <C> <C> <C>
REVENUES:
Net gain on principal transactions..................... $ 95,048 $ 3,688 $ -- $ 98,736
Commissions............................................ 26,576 7,387 -- 33,963
Other.................................................. 4,787 364 -- 5,151
----------- ----------- -------------- ---------
Total revenues....................................... 126,411 11,439 -- 137,850
----------- ----------- -------------- ---------
EXPENSES:
Employee compensation and benefits..................... 13,921 1,055 26,695(E) 41,671
Lease of exchange memberships.......................... 6,568 496 -- 7,064
Interest............................................... 3,577 410 (500)(C)
10,440(D) 13,927
Exchange, clearing and brokerage fees.................. 2,898 335 -- 3,233
Goodwill amortization.................................. 2,526 860(B) -- 3,386
Occupancy.............................................. 1,121 111 -- 1,232
Communications......................................... 964 26 -- 990
Legal and professional fees............................ 916 198 -- 1,114
Other.................................................. 2,285 660 -- 2,945
----------- ----------- -------------- ---------
Total expenses before managing directors'
compensation, limited partners' interest in
earnings of subsidiary and provision for income
taxes.............................................. 34,776 4,151 36,635 75,562
----------- ----------- -------------- ---------
Income before managing directors' compensation, limited
partners' interest in earnings of subsidiary and
provision for income taxes........................... 91,635 7,288 (36,635) 62,288
MANAGING DIRECTORS' COMPENSATION......................... 58,783 1,387 (60,170)(E) --
----------- ----------- -------------- ---------
Income before limited partners interest in earnings of
subsidiary and provision for income taxes............ 32,852 5,901 23,535 62,288
LIMITED PARTNERS' INTEREST IN EARNINGS OF SUBSIDIARY..... 26,292 -- (26,292)(H) --
----------- ----------- -------------- ---------
Income before provision for income taxes............... 6,560 5,901 49,827 62,288
PROVISION FOR INCOME TAXES............................... 3,900 200 23,307(F) 27,407
----------- ----------- -------------- ---------
Net income............................................. $ 2,660 $ 5,701 $ 26,520 $ 34,881
----------- ----------- -------------- ---------
----------- ----------- -------------- ---------
Pro forma basic and diluted net income per share......... $ (J)
---------
---------
Pro forma weighted average shares outstanding............ (J)
---------
---------
</TABLE>

See notes to pro forma consolidated financial information.

F-7
<PAGE>
LABRANCHE & CO INC. AND SUBSIDIARIES

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

(UNAUDITED)

(A) Reflects the pro forma earnings of Fowler, Rosenau for the six months ended
June 30, 1998.

(B) Reflects the pro forma goodwill amortization expense for the Fowler, Rosenau
acquisition.

(D) Reflects the issuance of $116.0 million of long-term indebtedness at an
assumed interest rate of 9.0%.

(E) Adjusts compensation and benefits based on new employment policies for
managing directors and reverses the difference between the actual
compensation and benefits paid and the amount which is assumed to be paid to
managing directors.

(F) Reflects federal, state and local income taxes at an estimated effective tax
rate of approximately 44% and reverses actual unincorporated business taxes.

(G) Reflects the redemption of limited partnership and membership interests for
$168.4 million, comprised of $157.4 million in cash and a net increase of
$11.0 million of subordinated indebtedness.

(H) Reflects reversal of limited partners' interest in earnings of subsidiary.

(I) Reflects net proceeds of $170.0 million to be received upon completion of
the initial public offering.

(J) Based on weighted average shares outstanding. Excludes (i) shares of
common stock subject to options and (ii) shares of restricted stock granted
under the Equity Incentive Plan.

F-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Members of
LaB Investing Co. L.L.C. and Subsidiary:

We have audited the accompanying consolidated statements of financial
condition of LaB Investing Co. L.L.C. and Subsidiary as of December 31, 1998 and
1997, and the related consolidated statements of operations, changes in members'
capital and cash flows for the three years in the period ended December 31,
1998. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LaB Investing Co. L.L.C. and
Subsidiary as of December 31, 1998 and 1997, and the results of their operations
and their cash flows for the three years in the period ended December 31, 1998
in conformity with generally accepted accounting principles.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The parent company only condensed
financial statements appearing on pages F-19 through F-23 are presented for the
purpose of complying with the Securities and Exchange Commission's rules and are
not part of the basic financial statements. Such statements have been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ ARTHUR ANDERSEN LLP

New York, New York
January 25, 1999

F-9
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(000'S OMITTED)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
MARCH 31, 1999 1998 1997
-------------- ---------- ----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CASH AND CASH EQUIVALENTS................................................ $ 2,465 $ 4,722 $ 2,989
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL.......................... 41,000 21,100 15,000
RECEIVABLE FROM BROKERS AND DEALERS...................................... 33,355 54,808 58,174
SECURITIES OWNED, at market value:
Corporate equities..................................................... 137,691 114,994 37,027
United States Government obligations................................... 1,487 1,468 2,466
Other.................................................................. 1,500 1,360 868
COMMISSIONS RECEIVABLE................................................... 3,467 3,009 1,737
EXCHANGE MEMBERSHIPS CONTRIBUTED FOR USE, at market value................ 20,000 12,250 12,250
EXCHANGE MEMBERSHIPS OWNED, at cost (market value of $4,900)............. 6,300 6,300 --
OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost, less accumulated
depreciation and amortization of $850, 729 and 346, respectively....... 1,589 1,647 586
GOODWILL................................................................. 46,685 47,532 24,243
OTHER ASSETS............................................................. 3,799 3,011 2,414
-------------- ---------- ----------
Total assets....................................................... $ 299,338 $ 272,201 $ 157,754
-------------- ---------- ----------
-------------- ---------- ----------
LIABILITIES AND MEMBERS' CAPITAL
LIABILITIES:
Payable to brokers and dealers......................................... $ 43,042 $ 3,892 $ 1,661
Securities sold, but not yet purchased, at market value................ 19,442 67,896 39,327
Accrued compensation................................................... 36,950 17,735 9,894
Accounts payable and other accrued expenses............................ 6,733 6,347 3,476
Other liabilities...................................................... 1,105 1,341 1,341
-------------- ---------- ----------
107,272 97,211 55,699
-------------- ---------- ----------
COMMITMENTS.............................................................. -- -- --
SUBORDINATED LIABILITIES................................................. 71,158 60,323 43,673
-------------- ---------- ----------
LIMITED PARTNERS' INTEREST IN SUBSIDIARY................................. 35,373 37,574 20,724
-------------- ---------- ----------
MEMBERS' CAPITAL......................................................... 85,535 77,093 37,658
-------------- ---------- ----------
Total liabilities and members' capital............................. $ 299,338 $ 272,201 $ 157,754
-------------- ---------- ----------
-------------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-10
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(000'S OMITTED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1998 1997 1996
FOR THE THREE MONTHS ENDED --------- --------- ---------
------------------------------
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net gain on principal transactions............ $ 36,366 $ 23,307 $ 95,048 $ 47,817 $ 37,113
Commissions................................... 8,270 5,299 26,576 15,186 10,180
Other......................................... 2,985 1,172 4,787 4,637 2,643
------- ------- --------- --------- ---------
Total revenues.............................. $ 47,621 $ 29,778 126,411 67,640 49,936
------- ------- --------- --------- ---------
EXPENSES:
Employee compensation and benefits............ 4,741 3,065 13,921 8,108 5,723
Severance..................................... -- -- -- 300 5,375
Lease of exchange memberships................. 2,073 1,357 6,568 3,727 2,468
Interest...................................... 1,099 677 3,577 1,566 331
Exchange, clearing and brokerage fees......... 1,007 656 2,898 2,042 1,514
Goodwill amortization......................... 847 416 2,526 737 --
Occupancy..................................... 393 140 1,121 465 435
Communications................................ 257 178 964 709 495
Legal and professional fees................... 75 172 916 620 170
Other......................................... 603 881 2,285 1,634 642
------- ------- --------- --------- ---------
Total expenses before managing directors'
compensation, limited partners' interest
in earnings of subsidiary and
unincorporated business taxes............. 11,095 7,542 34,776 19,908 17,153
------- ------- --------- --------- ---------
Income before managing directors'
compensation, limited partners' interest in
earnings of subsidiary and unincorporated
business taxes.............................. 36,526 22,236 91,635 47,732 32,783
MANAGING DIRECTORS' COMPENSATION................ 23,100 14,195 58,783 30,008 23,235
------- ------- --------- --------- ---------
Income before limited partners' interest in
earnings of subsidiary and unincorporated
business taxes.............................. 13,426 8,041 32,852 17,724 9,548
LIMITED PARTNERS' INTEREST IN EARNINGS OF
SUBSIDIARY.................................... 10,445 6,416 26,292 14,354 9,638
------- ------- --------- --------- ---------
Income (loss) before unincorporated business
taxes....................................... 2,981 1,625 6,560 3,370 (90)
UNINCORPORATED BUSINESS TAXES................... 1,400 1,200 3,900 1,881 1,602
------- ------- --------- --------- ---------
Net income (loss)............................. $ 1,581 $ 425 $ 2,660 $ 1,489 $ (1,692)
------- ------- --------- --------- ---------
------- ------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-11
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' CAPITAL

(000'S OMITTED)

<TABLE>
<CAPTION>
MEMBERS'
CAPITAL
----------
<S> <C>
BALANCE, January 1, 1996.............................................................................. $ 18,270
Net (loss).......................................................................................... (1,692)
Contributions to capital............................................................................ 6,092
Distributions of capital............................................................................ (8,935)
----------
BALANCE, December 31, 1996............................................................................ 13,735
Net income.......................................................................................... 1,489
Contributions to capital............................................................................ 28,574
Distributions of capital............................................................................ (6,140)
----------
BALANCE, December 31, 1997............................................................................ 37,658
Net income.......................................................................................... 2,660
Contributions to capital............................................................................ 66,563
Distributions of capital............................................................................ (29,788)
----------
BALANCE, December 31, 1998............................................................................ 77,093
Net income.......................................................................................... 1,581
Contributions to capital............................................................................ 11,309
Distributions of capital............................................................................ (4,448)
----------
BALANCE, March 31, 1999 (unaudited)................................................................... $ 85,535
----------
----------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-12
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(000'S OMITTED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
FOR THE THREE MONTHS ENDED ---------- ---------- ----------
------------------------------
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $ 1,581 $ 425 $ 2,660 $ 1,489 $ (1,692)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities--
Depreciation and amortization......................... 897 471 3,020 909 131
Undistributed limited partners interest in earnings of
subsidiary.......................................... 1,100 (906) 3,646 1,241 (2,098)
Changes in assets and liabilities--
Securities purchased under agreements to resell....... (19,900) (18,100) (6,100) (8,500) 800
Receivable from brokers and dealers................... 21,453 3,779 3,366 (40,188) 6,085
Corporate equities.................................... (22,697) (5,040) (77,967) (6,338) (16,132)
United States Government obligations.................. (19) 979 998 1 3,577
Other assets.......................................... (2,018) (791) (1,970) (2,047) (255)
Payable to brokers and dealers........................ 39,150 (1,622) 2,231 (2,731) 4,202
Securities sold, but not yet purchased................ (48,454) (2,327) 28,569 20,591 2,935
Accrued compensation.................................. 19,215 16,071 8,891 (5,322) 11,068
Accounts payable and other liabilities................ 246 1,784 2,379 1,404 1,385
-------------- -------------- ---------- ---------- ----------
Net cash (used in) provided by operating
activities........................................ (9,446) (5,277) (30,277) (39,491) 10,006
-------------- -------------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in office equipment and leasehold
improvements.......................................... (108) (254) (1,550) (278) (449)
-------------- -------------- ---------- ---------- ----------
Net cash (used in) investing activities............. (108) (254) (1,550) (278) (449)
-------------- -------------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments for notes payable.......................... (236) -- -- (33) (175)
Net proceeds from issuance of subordinated debt......... -- 900 16,750 28,004 1,769
Proceeds from contributions to capital.................. 10,186 4,924 46,598 10,948 6,092
Payments for distributions of capital................... (2,653) (1,610) (29,788) (6,140) (8,935)
-------------- -------------- ---------- ---------- ----------
Net cash provided by financing activities........... 7,297 4,214 33,560 32,779 (1,249)
-------------- -------------- ---------- ---------- ----------
Increase (decrease) in cash and cash equivalents.... (2,257) (1,317) 1,733 (6,990) 8,308

CASH AND CASH EQUIVALENTS, beginning of period............ 4,722 2,989 2,989 9,979 1,671
-------------- -------------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period.................. $ 2,465 $ 1,672 $ 4,722 $ 2,989 $ 9,979
-------------- -------------- ---------- ---------- ----------
-------------- -------------- ---------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH
PAID FOR:
Interest................................................ $ 2,916 $ 1,670 $ 8,788 $ 4,360 $ 2,764
Unincorporated business tax............................. 2,100 394 2,244 2,161 1,092
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES
Excess of purchase price over fair value of assets
acquired................................................ $ -- -- $ 25,815 $ 24,980 $ --
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-13
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

The consolidated financial statements include the accounts of LaB Investing
Co. L.L.C. ("LaB Investing"), a New York limited liability company and its
subsidiary LaBranche & Co. ("LaBranche & Co."), a New York limited partnership
(collectively, the "Partnership"). LaB Investing is the general partner of
LaBranche and has a partnership interest in LaBranche & Co. of 69.7%. Limited
partners own the remaining 30.3% of LaBranche & Co. LaBranche & Co. operates
primarily as a specialist on the New York Stock Exchange, Inc. ("NYSE").

2. INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL INFORMATION

The unaudited interim consolidated financial information as of March 31,
1999 and for the three months ended March 31, 1999 and 1998, are presented in
the accompanying consolidated financial statements. The unaudited interim
consolidated financial information reflects all adjustments, which are, in the
opinion of management, necessary for a fair presentation of the results for such
periods. Results of the interim periods are not necessarily indicative of
results to be obtained for a full fiscal year.

3. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Management does not believe
that actual results will differ materially from these estimates.

GOODWILL

Goodwill is being amortized on a straight-line basis over 15 years.

EXCHANGE MEMBERSHIPS

Exchange members owned by the Partnership are carried at cost.

Certain members and limited partners of the Partnership have contributed the
use of 10 memberships on the NYSE to the Partnership. These memberships are
subordinated to claims of general creditors and are carried at market value with
a corresponding amount recorded in subordinated liabilities. Lease payments are
paid by the Partnership to the members and limited partners for the use of the
exchange memberships at a rate management believes is commensurate with the rent
paid to nonaffiliated parties for the use of their exchange memberships.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and highly liquid investments with
maturities of less than three months to maturity.

F-14
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITIES TRANSACTIONS

Securities transactions and the related revenues and expenses are recorded
on a trade date basis. Securities owned and securities sold, but not yet
purchased are reflected at market value and unrealized gains and losses are
reflected in net gain on principal transactions. Dividends and Securities and
Exchange Commission (the "SEC") fees are also included in net gain on principal
transactions. Dividend income and expense is recognized on the payable date
which does not differ materially from the ex-date.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of office equipment and leasehold improvements.

COLLATERALIZED FINANCING TRANSACTIONS

Securities purchased and sold under agreements to resell and repurchase, as
well as securities borrowed and loaned for which cash is deposited or received,
are treated as collateralized financing transactions and are recorded at
contract amount.

COLLATERAL

The Partnership continues to report assets as owned when they are pledged as
collateral in secured financing arrangements and the secured party cannot sell
or repledge the assets or the Partnership can substitute collateral or otherwise
redeem it on short notice. The Partnership continues not to report securities
received as collateral in secured financing arrangements because the debtor
typically has the right to substitute or redeem the collateral on short notice.

REPORTABLE OPERATING SEGMENT

The Partnership considers its present operations to be one reportable
segment for purposes of presenting consolidated financial information and for
evaluating its performance. The financial statement information presented in the
accompanying consolidated financial statements is consistent with the
preparation of financial information for the purpose of internal use.

MANAGING DIRECTORS' COMPENSATION

The managing directors of LaBranche & Co. are the members of LaB Investing.
The Partnership pays out substantially all of its earnings as compensation
expense to its managing directors.

F-15
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. RECEIVABLE FROM AND PAYABLE TO BROKERS AND DEALERS

The balances presented as receivable from, and payable to, brokers and
dealers consist of the following at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Receivable from brokers and dealers:
Pending trades, net................................................................ $ 34,390,173 $ 42,858,436
Securities borrowed................................................................ 17,386,200 13,410,300
Receivable from clearing organizations............................................. 1,812,999 1,905,532
Securities failed to deliver....................................................... 1,218,950 --
------------- -------------
$ 54,808,322 $ 58,174,268
------------- -------------
------------- -------------
Payable to brokers and dealers:
Securities failed to receive....................................................... $ 3,892,030 $ 1,661,359
------------- -------------
------------- -------------
</TABLE>

5. TAXES

The Partnership is not subject to federal or state income taxes. Such taxes,
if any, are the responsibility of the individual members. The Partnership is
subject to the New York City Unincorporated Business Tax.

6. CAPITAL AND NET LIQUID ASSET REQUIREMENTS

As a specialist and member of the NYSE, LaBranche & Co. is subject to SEC
Rule 15c3-1 adopted and administered by the NYSE and the SEC. LaBranche & Co. is
required to maintain minimum net capital, as defined, equivalent to the greater
of $100,000 or 1/15 of aggregate indebtedness, as defined.

As of March 31, 1999 (unaudited) and as of December 31, 1998, LaBranche &
Co.'s net capital, as defined under SEC Rule 15c3-1, was $97,680,696 and
$86,545,533, respectively, and exceeded minimum requirements by $94,936,446 and
$85,169,019, respectively. LaBranche & Co.'s net capital to aggregate
indebtedness ratio was 2.4 to 1 and 4.2 to 1, respectively.

The NYSE also requires members registered as regular specialists to
establish that they can meet, with their own net liquid assets, a minimum dollar
amount which shall be the greater of $1,000,000 or 25% of their position
requirement ("Rule 104.2"). In 1998, due to the market share represented by the
Partnership's specialist book, the NYSE mandated the firm to maintain minimum
net liquid assets of the greater of 120% of LaBranche's Rule 104.2 position
requirement, or $90.0 million, adjusted by the amount of the position
requirement for any new stock allocations. The position requirement is the
ability to assume positions in stocks in which they are registered, of 30,000
shares of each S&P 500 common stock, 22,500 shares in all other common stocks,
4,500 shares in each convertible preferred stock and 1,800 shares in each
nonconvertible preferred stock. The term "net liquid assets" for a specialist
which also engages in transactions other than specialist activities is based
upon its excess net capital determined in accordance with SEC Rule 15c3-1.

As of March 31, 1999 (unaudited) and as of December 31, 1998, the
Partnership's NYSE minimum required dollar amount of net liquid assets, as
defined, was $91.5 million and $90.6 million, respectively, compared to actual
net liquid assets, as defined, of $109,592,384 and $103,134,594, respectively.

F-16
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. ACQUISITIONS

The acquisitions of the specialist operations described below were accounted
for under the purchase method of accounting. The purchase price associated with
each acquisition consisted of general partnership and limited partnership
interests issued to new partners admitted into the Partnership. Such partnership
interests were valued based upon an independent appraisal. Excess purchase price
over fair value of net assets acquired has been allocated to goodwill.

Effective July 1, 1997, the Partnership acquired a portion of the specialist
operations of Stern Bros., LLC for an aggregate purchase price of approximately
$9.3 million representing an 8.3% total general partners' interests in the
Partnership. The goodwill associated with the acquisition was approximately $7.8
million.

Effective August 1, 1997, the Partnership acquired the specialist operations
of Ernst, Homans, Ware & Keelips for an aggregate purchase price of
approximately $18.5 million representing general and limited partnership
interest totaling 16.4%. The excess purchase price over fair value of net assets
acquired was approximately $17.2 million.

Effective July 1, 1998, the Partnership acquired the specialist operations
of Fowler, Rosenau & Geary, L.L.C. ("Fowler, Rosenau") for an aggregate purchase
price of approximately $45.0 million representing a 22.4% total general and
limited partners' interest in the Partnership. The excess purchase price over
fair value of net assets acquired was approximately $25.8 million. (The audited
financial statements of Fowler, Rosenau have been included elsewhere in this
prospectus).

8. COMMITMENTS

During 1998, the Partnership secured a $75.0 million committed line of
credit with the Bank of New York. The agreement matures on June 25, 1999, at
which time the Partnership intends to renegotiate the line. In addition, the
Partnership has outstanding letter of credit agreements with U.S. Trust
aggregating approximately $1,581,000. Such letter of credit agreements are
collateralized with U.S. Trust by a Treasury bill with a face value of $1.5
million and a cash balance of approximately $179,000.

Minimum rental commitments under existing noncancelable leases for office
space and equipment are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- --------------------------------------------------------------------------------
<S> <C>
1999............................................................................ $ 684,000
2000............................................................................ 468,000
2001............................................................................ 540,000
2002............................................................................ 540,000
2003............................................................................ 540,000
Thereafter...................................................................... 2,304,000
</TABLE>

These leases contain escalation clauses providing for increased rentals
based upon maintenance and tax increases.

9. SUBORDINATED LIABILITIES

The Partnership has subordinated indebtedness agreements approved by the
NYSE for inclusion as net capital, as defined. Interest is payable quarterly at
various annual rates. Eleven of the agreements

F-17
<PAGE>
LAB INVESTING CO. L.L.C. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. SUBORDINATED LIABILITIES (CONTINUED)
representing $11,473,000 mature within the last six months of 1999, and the
remaining four agreements representing $1,200,000 mature within the first six
months of 2000. These agreements all have automatic rollover provisions as long
as at least six months notice is given by the lender.

Seven agreements representing $20,000,000 mature on September 15, 2002 with
an annual rate of 8.17% paid on a quarterly basis. Five agreements representing
$15,000,000 mature on June 3, 2008 with an annual rate of 7.69% paid on a
quarterly basis. These notes are senior to all other subordinated notes.

The Partnership entered into a subordinated liability related to a Secured
Demand Note Receivable for $300,000 due July 15, 1999 and $100,000 due May 1,
1999 both with an annual rate of 10.0% paid on a quarterly basis. These
agreements have automatic rollover provisions as long as at least seven months
notice is given by the lender.

Interest expense related to the above subordinated liabilities primarily
comprises interest expense in the accompanying statements of operations.

Exchange membership contributed pursuant to subordination agreements in the
amount of $12,250,000 comprise the remaining subordinated liabilities.

10. SEVERANCE ARRANGEMENTS

For the years ended December 31, 1997 and 1996, the Partnership entered into
severance arrangements with two of their former members. The Partnership
recorded the full amount of severance upon termination of these individuals in
1997 and 1996.

11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires companies to report the fair value of
financial instruments for certain assets and liabilities. Substantially all of
the Partnership's financial instruments are short-term in nature or carry market
interest rates and, accordingly, approximate fair value.

12. FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT AND OFF-BALANCE SHEET
RISK

As a specialist on the NYSE, the Partnership is engaged in various
securities trading and lending activities. In connection with its activities as
a specialist, the Partnership assumes positions in the stocks for which it is
responsible. The Partnership is exposed to credit risk associated with the
nonperformance of counterparties in fulfilling their contractual obligations
pursuant to these securities transactions. The Partnership is exposed to market
risk associated with the sale of securities not yet purchased, which can be
directly impacted by volatile trading on the NYSE. Additionally, in the event of
nonperformance and unfavorable market price movements, the Partnership may be
required to purchase or sell financial instruments, which may result in a loss
to the Partnership.

The Partnership enters into collateralized financing agreements in which it
extends short-term credit to major financial institutions. The Partnership
controls access to the collateral pledged by the counterparties, which generally
consists of U.S. equity and government securities. The value and adequacy of the
collateral are continually monitored. Consequently, the risk of credit loss from
counterparties' failure to perform in connection with collateralized lending
activities is minimal.

F-18
<PAGE>
LAB INVESTING CO. L.L.C.

(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF FINANCIAL CONDITION

(000'S OMITTED)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
MARCH 31, 1999 --------- ---------
--------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CASH........................................................................ $ 21 21 15
DUE FROM SUBSIDIARY......................................................... -- -- 13
INVESTMENT IN SUBSIDIARY, AT EQUITY VALUE................................... 85,514 77,072 37,630
------- --------- ---------
Total Assets.............................................................. $ 85,535 $ 77,093 $ 37,658
------- --------- ---------
------- --------- ---------
MEMBERS' CAPITAL
MEMBERS' CAPITAL............................................................ 85,535 77,093 37,658
------- --------- ---------
Total Members' Capital.................................................... $ 85,535 $ 77,093 $ 37,658
------- --------- ---------
------- --------- ---------
</TABLE>

See accompanying note to condensed financial statements.

F-19
<PAGE>
LAB INVESTING CO. L.L.C.

(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF OPERATIONS

(000'S OMITTED)

See accompanying note to condensed financial statements.

F-20
<PAGE>
LAB INVESTING CO. L.L.C.

(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF CHANGES IN MEMBERS' CAPITAL

(000'S OMITTED)

<TABLE>
<CAPTION>
MEMBERS'
CAPITAL
-----------
<S> <C>
BALANCE, January 1, 1996............................................................................. $ 18,270
Net (loss)......................................................................................... (1,680)
Contributions to capital........................................................................... 6,090
Distributions of capital........................................................................... (8,935)
-----------
BALANCE, December 31, 1996........................................................................... 13,745
Net income......................................................................................... 1,498
Contributions to capital........................................................................... 28,555
Distributions of capital........................................................................... (6,140)
-----------
BALANCE, December 31, 1997........................................................................... 37,658
Net income......................................................................................... 2,657
Contributions to capital........................................................................... 66,561
Distributions of capital........................................................................... (29,783)
-----------
BALANCE, December 31, 1998........................................................................... 77,093
Net income......................................................................................... 1,581
Contributions to capital........................................................................... 11,309
Distributions of capital........................................................................... (4,448)
-----------
BALANCE, March 31, 1999 (unaudited).................................................................. $ 85,535
-----------
-----------
</TABLE>

See accompanying note to condensed financial statements.

F-21
<PAGE>
LAB INVESTING CO. L.L.C.

(PARENT COMPANY ONLY)

CONDENSED STATEMENT OF CASH FLOW

(000'S OMITTED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
FOR THE THREE MONTHS ENDED DECEMBER 31,
------------------------------ ---------------------------------
MARCH 31, 1999 MARCH 31, 1998 1998 1997 1996
-------------- -------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................... $ 1,581 $ 424 $ 2,657 $ 1,498 $ (1,680)
Changes in assets and liabilities--
Due from subsidiary....................... -- 13 -- 36 52
(Increase) decrease in investment in
subsidiary.............................. (8,442) (4,440) (19,464) (6,343) 4,812
Other liabilities......................... -- -- -- (10) (370)
------- ------- ---------- ---------- ---------
(6,861) (4,003) (16,807) (4,819) 2,814
------- ------- ---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from contributions to capital...... 11,309 4,718 46,596 10,929 6,090
Payments for distributions of capital....... (4,448) (718) (29,783) (6,140) (8,935)
------- ------- ---------- ---------- ---------
Net change in cash............................ -- (3) 6 (30) (31)
Cash, beginning of period..................... 21 15 15 45 76
------- ------- ---------- ---------- ---------
Cash, end of period........................... $ 21 $ 12 $ 21 $ 15 $ 45
------- ------- ---------- ---------- ---------
------- ------- ---------- ---------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH PAID FOR:
Unincorporated business tax................. $ -- $ 1 $ 3 $ 11 $ 344
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:
Excess of purchase price over fair value of
assets acquired........................... -- -- $ 19,965 $ 17,626 --
</TABLE>

See accompanying note to condensed financial statements.

F-22
<PAGE>
LAB INVESTING CO. L.L.C.
(PARENT COMPANY ONLY)

NOTE TO CONDENSED FINANCIAL STATEMENTS

1. NOTE TO FINANCIAL STATEMENTS

The condensed financial statements of LaB Investing (parent company only)
should be read in conjunction with the consolidated financial statements of LaB
Investing and Subsidiary and the notes thereto contained elsewhere in this
prospectus.

F-23
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Members of Fowler, Rosenau & Geary, LLC

We have audited the accompanying statements of financial condition of
Fowler, Rosenau & Geary, LLC for the years ended November 30, 1997 and 1996, and
for the seven months ended June 30, 1998 and the related statements of income,
changes in members' capital, and cash flow for the periods then ended. The
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant statements made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits prove a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fowler, Rosenau & Geary, LLC
as of November 30, 1997 and 1996, and June 30, 1998, and the results of its
operations and its cash flow for the periods then ended in conformity with
generally accepted accounting principles.

/s/ Sugarman & Thrope, P.C.
January 20, 1999
New York, NY

F-24
<PAGE>
FOWLER, ROSENAU & GEARY, LLC

STATEMENTS OF FINANCIAL CONDITION

(000'S OMITTED)

<TABLE>
<CAPTION>
NOVEMBER 30,
JUNE 30, --------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Cash........................................................................... $ 312 $ 189 $ 69
Commissions Receivable......................................................... 2,698 817 875
Inventory of Specialist Stocks--At Market...................................... 15,486 9,482 8,315
Receivable from Broker Dealers................................................. 7,163 14,040 12,643
Deposits and Rent Security..................................................... 606 752 550
Memberships (four) in New York Stock Exchange--At cost......................... 3,414 2,209 2,209
Furniture, Equipment and Leasehold Improvements at Cost, Net of Accumulated
Depreciation and Amortization................................................ -- 124 161
Investment in Clearing Broker.................................................. -- -- 509
Other Assets................................................................... 26 33 47
--------- --------- ---------
$ 29,705 $ 27,646 $ 25,378
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND CAPITAL
Short Sales of Specialist Stocks--At Market.................................... $ 7,084 $ 2,848 $ 4,188
Accounts Payable and Accrued Expenses.......................................... 618 1,365 1,311
--------- --------- ---------
Total Liabilities............................................................ 7,702 4,213 5,499
Members' Capital............................................................... 22,003 23,433 19,879
--------- --------- ---------
$ 29,705 $ 27,646 $ 25,378
--------- --------- ---------
--------- --------- ---------
</TABLE>

See the accompanying notes.

F-25
<PAGE>
FOWLER, ROSENAU & GEARY, LLC

STATEMENTS OF INCOME

(000'S OMITTED)

<TABLE>
<CAPTION>
FOR THE
SEVEN MONTHS FOR THE YEARS ENDED
ENDED NOVEMBER 30,
JUNE 30, --------------------
1998 1997 1996
------------- --------- ---------
<S> <C> <C> <C>
REVENUES
Principal Transactions, net............................................ $ 4,664 $ 11,874 $ 9,396
Commissions............................................................ 8,300 10,909 9,786
Other.................................................................. 367 773 217
------------- --------- ---------
Total Revenues....................................................... 13,331 23,556 19,399
------------- --------- ---------
EXPENSES
Employee Compensation and Related Expenses............................. 1,233 2,192 1,828
Severance.............................................................. 54 281 281
Rental of Exchange Memberships......................................... 577 547 505
Seat Interest Paid to Members.......................................... 233 420 200
Unincorporated Business Tax............................................ 465 713 591
Brokerage, Clearing and Exchange Fees.................................. 401 1,225 802
Occupancy.............................................................. 129 214 211
Communications......................................................... 31 50 24
Legal and Professional Fees............................................ 208 100 159
Insurance.............................................................. 199 323 321
Other.................................................................. 546 709 614
------------- --------- ---------
Total expenses before members' compensation.......................... 4,076 6,774 5,536
------------- --------- ---------
Net Income before members' compensation.............................. 9,255 16,782 13,863
Members' Compensation................................................ 1,626 2,987 2,825
------------- --------- ---------
NET INCOME........................................................... $ 7,629 $ 13,795 $ 11,038
------------- --------- ---------
------------- --------- ---------
</TABLE>

See the accompanying notes.

F-26
<PAGE>
FOWLER, ROSENAU & GEARY, LLC

STATEMENTS OF CHANGES IN MEMBERS' CAPITAL

(000'S OMITTED)

<TABLE>
<CAPTION>
FOR THE SEVEN
MONTHS FOR THE YEARS ENDED
ENDED NOVEMBER 30,
JUNE 30, ---------------------
1998 1997 1996
------------- ---------- ---------
<S> <C> <C> <C>
Balance, December 1................................................... $ 23,433 $ 19,879 $ 18,563
Net income............................................................ 7,629 13,795 11,038
------------- ---------- ---------
31,062 33,674 29,601
Additions (withdrawals) of Capital, net............................... (9,059) (10,241) (9,722)
------------- ---------- ---------

Balance, end of period................................................ $ 22,003 $ 23,433 $ 19,879
------------- ---------- ---------
------------- ---------- ---------
</TABLE>

See the accompanying notes.

F-27
<PAGE>
FOWLER, ROSENAU & GEARY, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED NOVEMBER 30, 1997 AND 1996

AND FOR THE SEVEN MONTHS ENDED JUNE 30, 1998
(000'S OMITTED)

<TABLE>
<CAPTION>
FOR THE FOR THE
SEVEN MONTHS YEARS ENDED NOVEMBER
ENDED 30,
JUNE 30, ---------------------
1998 1997 1996
------------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................................ $ 7,629 $ 13,795 $ 11,038
Adjustments to Reconcile to Net Cash provided by Operating Activities:
Depreciation............................................................ 134 71 41
Changes in Assets and Liabilities:
Commissions and Dividends Receivable.................................... (1,881) 58 (195)
Inventory of Specialist Stocks.......................................... (6,004) (1,167) 1,354
Clearing accounts--Net.................................................. 6,877 (1,397) (2,435)
Other Assets............................................................ 7 14 (2)
Short Inventory of Specialist Stocks.................................... 4,236 (1,340) (720)
Accounts Payable and Accrued Expenses................................... (747) 54 476
------------- ---------- ---------
Net Cash Provided by Operating Activities................................. 10,251 10,088 9,557
------------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Office Furniture and Equipment Purchase................................... (10) (34) (194)
Investment in Clearing Broker............................................. -- 509 1,475
Rent Security and Deposits................................................ 146 (202) (240)
Increase in Exchange Memberships.......................................... (1,205) -- (921)
------------- ---------- ---------
Net Cash (used in) provided by Investing Activities....................... (1,069) 273 120
------------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Withdrawal of Capital................................................. (9,059) (10,241) (9,722)
------------- ---------- ---------
Increase (decrease) in cash............................................... 123 120 (45)
Cash, beginning of year................................................... 189 69 114
------------- ---------- ---------
Cash, end of period....................................................... $ 312 $ 189 $ 69
------------- ---------- ---------
------------- ---------- ---------
</TABLE>

See the accompanying notes.

F-28
<PAGE>
FOWLER, ROSENAU & GEARY, LLC

NOTES TO FINANCIAL STATEMENTS

(1) Accounting policies followed by the Firm:

As of December 1, 1995, the firm changed from a limited partnership
(L.P.) to a limited liability company (LLC)

Security transactions are recorded on a trade date basis.

The inventory of securities in the firm's specialist trading account was
valued under the last in first out, (LIFO) method of valuation until
November 30, 1993. Thereafter, the securities inventory is valued at market.

Federal, State and City income taxes have not been provided for since
each member is individually liable for his own tax payments. The firm is
liable for New York City Unincorporated Business Tax and has filed returns
and paid the tax to November 30, 1998.

The company's business operations were "merged" into LaBranche & Co. as
of the close of business on June 30, 1998. At that time the Specialist
securities, (long and short), and four memberships were transferred to
LaBranche & Co. All other assets and liabilities were retained by Fowler,
Rosenau & Geary, LLC

(2) In addition to the three New York Stock Exchange memberships, the use of
which is contributed to the parternship, the firm holds four other
memberships subject to ABC agreements.

(3) The investment in clearing broker Murphey, Marseilles, Smith & Nammack, Inc.
became worthless in 1996 and was written off as a loss.

(4) The Deposit and rent security is comprised of:

<TABLE>
<S> <C>
Internal Revenue Service -- certain deposit attributable to the
use of a fiscal year other than the calendar year............... $ 581,144
Rent security deposit............................................. 25,000
---------
$ 606,144
---------
---------
</TABLE>

(5) Off Balance Sheet Risk -- the firm is subject to the risks of fluctuation in
the value of its long and short positions, which positions it is required to
take as part of its functioning as a NYSE specialist.

F-29
<PAGE>
\
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

LABRANCHE & CO INC.

COMMON STOCK

---------

PROSPECTUS

, 1999

---------

SALOMON SMITH BARNEY

DONALDSON, LUFKIN & JENRETTE

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by LaBranche & Co Inc. in
connection with the sale of the common stock being registered hereby. All the
amounts shown are estimated, except the SEC registration fee, the NASD filing
fee and the New York Stock Exchange listing fee.

<TABLE>
<S> <C>
SEC Registration Fee............................ $ 59,145
NASD Filing Fee................................. 21,775
New York Stock Exchange Listing Fee.............
Printing Expenses...............................
Legal Fees and Expenses.........................
Accounting Fees and Expenses....................
Blue Sky Expenses and Counsel Fees..............
Transfer Agent and Registrar Fees...............
Miscellaneous...................................
---------
Total......................................... $
---------
---------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145(a) of the General Corporation Law of the State of Delaware
("DGCL") provides that a Delaware corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.

Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the court in which such
action or suit was brought shall determine that despite the adjudication of
liability, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.

Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be

II-1
<PAGE>
entitled; and that the corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him or incurred by him in any such
capacity or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liabilities under such
Section 145.

Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director: (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from
which the director derived an improper personal benefit.

Article Tenth of the certificate of incorporation of LaBranche & Co Inc.
(the "Company"), states that to the fullest extent permitted by the DGCL, no
director of the Company shall be personally liable to the Company, any of its
stockholders or any other person or entity for monetary damages for breach of
fiduciary duty owed to the Company, its stockholders or such other person or
entity owing to such director's position as a director of the Company.

Article Eleventh of the Company's certificate of incorporation, contains
substantially the same provisions for indemnification as those contained in
Section 145 of the DGCL.

The Company intends to enter into indemnification agreements with its
current directors and executive officers. The Company intends to insure its
directors and officers against losses arising from any claim against them as
such for wrongful acts or omission, subject to certain limitations.

Under Section of the underwriting agreement, the underwriters are
obligated, under certain circumstances, to indemnify officers, directors and
controlling persons of the Company against certain liabilities, including
liabilities under the Securities Act of 1933. Reference is made to the form of
underwriting agreement filed as Exhibit 1.1 hereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

As part of the Reorganization and Related Transactions, LaBranche & Co Inc.
will issue: (i) an aggregate of shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), to certain limited partners of
LaBranche & Co. and all of the members of LaB Investing and (ii) a $16.0 million
subordinated note (collectively, the "Reorganization Securities"). Also
immediately prior to this offering, the Company will make awards of stock
options, restricted stock and restricted stock units to certain of its
employees. Since 1996, the Company sold (i) $20.0 million aggregate principal
amount of 8.17% subordinated notes; (ii) $15.0 million aggregate principal
amount of 7.69% subordinated notes; and (iii) $15.3 million aggregate principal
amount of 10.0% subordinated notes (collectively, the "Notes"). The offering and
sale of the Reorganization Securities will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), because they will
have been offered and sold in transactions exempt form registration under the
Securities Act pursuant to Section 4(2). The offering and sale of the Notes were
not registered under the Securities Act because they were offered and sold in
transactions exempt from registration under the Securities Act pursuant to
Section 4(2). The employee awards will not be registered under the Securities
Act because the awards will not involve an offer or sale for purposes of Section
2(a)(3) of the Securities Act.

II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibit Index

<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement.*

2.1 Plan of Incorporation of LaBranche & Co. dated as of , 1999.*

2.2 Exchange Agreement dated , by and among LaBranche & Co Inc., LaB Investing Co., L.L.C.
and the members of LaB Investing Co., L.L.C. listed on Schedule A thereto.*

3.1 Amended and Restated Certificate of Incorporation of the Company.*

3.2 Amended and Restated Bylaws of the Company.*

4.1 Specimen Stock Certificate.*

5.1 Opinion of Fulbright & Jaworski L.L.P. re: legality.*

10.1 Agreement of Lease between Aetna Life Insurance Company and LaBranche & Co., dated January 6, 1984, as
amended to date.*

10.2 Second Amendment to Lease Agreement by and between Bank of Communications and LaBranche & Co. dated
July , 1995, as amended to date.*

10.3 Equity Incentive Plan of the Company.*

10.4 Form of Employment Letter between the Company and its executive officers.*

10.5 Form of Agreement Relating to Non competition and Other Covenants.*

10.6 Form of Pledge Agreement.*

10.7 Stockholders' Agreement dated as of , 1999, by and among LaBranche & Co Inc. and the
Stockholders listed on Schedule I thereto.*

10.8 LaBranche & Co. Note Purchase Agreement, dated September 15, 1997, relating to the issuance of
$20,000,000 aggregate principal amount of 8.17% Subordinated Notes.*

10.9 LaBranche & Co. Note Purchase Agreement, dated June 3, 1998, relating to the issuance of $15,000,000
aggregate principal amount of 7.69% Subordinated Notes.*

10.10 Form of Subordinated Note.*

23.1 Consent of Fulbright & Jaworski L.L.P. (Included in Exhibit 5.1).*

23.2 Consent of Arthur Andersen L.L.P.

23.3 Consent of Sugarman & Thrope, P.C.

24.1 Power of attorney (included on signature page).

27.1 Financial Data Schedule.
</TABLE>

* To be filed by amendment

(b) Financial Statement Schedules. The following financial statement
schedules are filed herewith.

All other schedules are omitted because they are not required or are not
applicable or the information is included in the financial statements or notes
thereto.

II-3
<PAGE>
ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on June 18, 1999.

LABRANCHE & CO INC.

BY: /S/ GEORGE M.L. LABRANCHE, IV
-----------------------------------------
George M.L. LaBranche, IV
Chairman and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below and on the following page constitutes and appoints each of George M.L.
LaBranche, IV and Todd Graber as his true and lawful attorney-in-fact and agent,
each acting alone, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement, including post-effective amendments,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all that any said attorney-in-fact and
agent, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ GEORGE M.L. LABRANCHE, Chief Executive Officer and
IV Chairman of the Board
- ------------------------------ (Principal Executive June 18, 1999
George M.L. LaBranche, IV Officer)

/s/ TODD GRABER Principal Accounting
- ------------------------------ Officer June 18, 1999
Todd Graber

/s/ JAMES GALLAGHER Director
- ------------------------------ June 18, 1999
James Gallagher

/s/ ALFRED O. HAYWARD, JR. Director
- ------------------------------ June 18, 1999
Alfred O. Hayward, Jr.

II-5
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Underwriting Agreement.*

2.1 Plan of Incorporation of LaBranche & Co. dated as of , 1999.*

2.2 Exchange Agreement dated , by and among LaBranche & Co Inc., LaB Investing Co., L.L.C.
and the members of LaB Investing Co., L.L.C. listed on Schedule A thereto.*

3.1 Amended and Restated Certificate of Incorporation of the Company.*

3.2 Amended and Restated Bylaws of the Company.*

4.1 Specimen Stock Certificate.*

5.1 Opinion of Fulbright & Jaworski L.L.P. re: legality.*

10.1 Agreement of Lease between Aetna Life Insurance Company and LaBranche & Co., dated January 6, 1984, as
amended to date.*

10.2 Second Amendment to Lease Agreement by and between Bank of Communications and LaBranche & Co. dated
July , 1995, as amended to date.*

10.3 Equity Incentive Plan of the Company.*

10.4 Form of Employment Letter between the Company and its executive officers.*

10.5 Form of Agreement Relating to Noncompetition and Other Covenants.*

10.6 Form of Pledge Agreement.*

10.7 Stockholders' Agreement dated as of , 1999, by and among LaBranche & Co Inc. and the
Stockholders listed on Schedule I thereto.*

10.8 LaBranche & Co. Note Purchase Agreement, dated September 15, 1997, relating to the issuance of
$20,000,000 aggregate principal amount of 8.17% Subordinated Notes.*

10.9 LaBranche & Co. Note Purchase Agreement, dated June 3, 1998, relating to the issuance of $15,000,000
aggregate principal amount of 7.69% Subordinated Notes.*

10.10 Form of Subordinated Note.*

23.1 Consent of Fulbright & Jaworski L.L.P. (Included in Exhibit 5.1).*

23.2 Consent of Arthur Andersen L.L.P.

23.3 Consent of Sugarman & Thrope, P.C.

24.1 Power of attorney (included on signature page).

27.1 Financial Data Schedule
</TABLE>

* To be filed by amendment

(b) Financial Statement Schedules. The following financial statement
schedules are filed herewith.

All other schedules are omitted because they are not required or are not
applicable or the information is included in the financial statements or notes
thereto.

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made part of this
registration statement.

/s/ ARTHUR ANDERSEN LLP
New York, New York
June 18, 1999

<PAGE>
EXHIBIT 23.3

[Letterhead]

June 18, 1999

RE: LA BRANCHE & CO., INC.

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made part of this registration
statement.

/s/ SUGARMAN & THROPE, P.C.

New York, New York
June 18, 1999

<PAGE>
<ARTICLE> BD
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 DEC-31-1998
<CASH> 2,465 4,722
<RECEIVABLES> 33,355 54,808
<SECURITIES-RESALE> 41,000 21,100
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 140,678 117,817
<PP&E> 1,589 1,647
<TOTAL-ASSETS> 299,338 272,201
<SHORT-TERM> 0 0
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<LONG-TERM> 71,158 60,323
0 0
0 0
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<TOTAL-LIABILITY-AND-EQUITY> 299,338 272,201
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<COMMISSIONS> 8,270 26,576
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 1,099 3,577
<COMPENSATION> 4,741 13,921
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<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,581 2,660
<EPS-BASIC> 0 0
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</TABLE>